US retail sales rise marginally in June

Household budgets have been strained by higher prices from import tariffs and more recently the Middle East conflict. Spending continues to be driven by higher-income households, which have seen their wealth boosted by a stock market rally.

Bank of America Institute noted that lower-income families had traded down the most, "experiencing five times faster spending at discount apparel stores than higher-income households so far in 2026."

The Federal Reserve's Beige Book report on Wednesday described consumer spending as having edged up in early July, adding that "several districts noted declines in spending on discretionary items or trading down to more affordable varieties."

Economists expect consumer spending, which accounts for more than two-thirds of the economy, picked up in the second quarter after almost stalling in the January-March quarter. The Atlanta Fed's model is currently forecasting GDP growth at a 1.3% annualized rate in the April-June quarter. The economy grew at a 2.1% pace in the first quarter.