The data: US consumer spending inched up just 1.4% YoY in Q2, per the US Commerce Department.

• While that’s up from the tepid 0.5% in Q1, it’s well below the 2.8% growth in spending in 2024, and the fifth-slowest rate since Q3 2021.
• Goods spending rose 2.2% YoY, up from 0.1% the prior quarter, while services spending increased 1.1% YoY, ahead of the 0.6% in Q1.

The labor market: Hiring momentum is losing steam.

• Job openings slipped to 7.44 million in June from a revised 7.71 million in May, undershooting economists’ expectations of 7.5 million, per the US Labor Department.
• Economists surveyed by The Wall Street Journal expect Friday’s July jobs report to show only about 100,000 new positions, compared with 147,000 in June.

Our take: The economy has slowed sharply from last year’s pace as trade uncertainty, a softening labor market, and elevated borrowing costs weigh on consumer and business spending.

• Those headwinds are unlikely to lift soon, and consumers may face fresh price pressure, as companies from consumer packaged goods giants like Procter & Gamble and Kraft Heinz to toy makers like Hasbro and Mattel to household names like Stanley Black & Decker and even Walmart have indicated further price increases are coming.
• With spending already fragile, an uptick in inflation could push households to tighten their belts even more in the second half of the year.

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