The news: Several key economic signals suggest pressure on consumers is building with the holiday season fast approaching.

Inflation remains well above the Fed’s 2% target. The Personal Consumption Expenditures (PCE) price index rose 3.7% YoY in July, unchanged from June, per the US Bureau of Economic Analysis (BEA). Core prices, which strip out volatile food and energy categories, increased 3.3%, also unchanged from June. Consumers have taken notice. Nearly 40% in July cited inflation as the biggest issue facing the country, per Numerator. Rising prices have been the most-cited issue in all but one month this year, with the share naming them as their top concern hovering around 40% for the past three months.

Diesel prices are nearing a record high. The average price of a gallon of diesel on August 26 was $5.62, up 53% YoY, per AAA, just 20 cents shy of the record set in 2022 after Russia invaded Ukraine. Because diesel powers everything from farm equipment to the trucks moving goods through the supply chain, higher transportation and production costs can eventually reach consumers.

Consumers are pessimistic that conditions will improve. The Conference Board’s measure of expectations for the next six months fell to its lowest level since January in August, even as its measure of current conditions reached a four-month high.

The good news: The BEA report also offered some encouraging signs. Personal income after taxes rose 4.2% YoY in July, outpacing inflation, while real PCE, which measures consumer spending after adjusting for inflation, increased 2.1%.

Implications for retailers and brands: Despite the economic warning signs, consumers continue to spend, albeit more cautiously.