The U.S. economy continued to show signs of resilience in July, with household income and consumer spending both increasing even as inflation remained elevated. New economic data released Wednesday, August 26, 2026, offered a fresh look at the financial position of American households and the pace of economic activity during the summer.
According to the latest federal economic figures, personal income increased by $115.1 billion in July, representing a 0.4% monthly gain. Disposable personal income, which reflects the amount of money households have available after taxes, rose by $125.9 billion, or 0.5%.
Consumer spending also increased during the month. Personal consumption expenditures rose by $36.3 billion, or 0.2%. The increase indicates that households continued to spend despite ongoing price pressures and uncertainty surrounding the broader economy.
However, when inflation is taken into account, the picture is more restrained. Real personal consumption expenditures, which adjust spending for changes in prices, were essentially unchanged in July. This suggests that part of the increase in dollar-denominated consumer spending reflected higher prices rather than a significant increase in the volume of goods and services purchased.
The composition of consumer spending also shifted during the month. Spending on services increased substantially, while spending on goods declined. The trend highlights the continuing importance of services to the U.S. economy, as households allocate more of their budgets toward areas such as housing, health care, financial services, transportation and other services.
Inflation remained one of the most important features of the latest economic report. The Personal Consumption Expenditures price index, a closely watched measure of inflation, increased 0.2% in July compared with June. Prices were 3.7% higher than they were a year earlier.
The core PCE price index, which excludes food and energy prices, also increased 0.2% during July. On an annual basis, core prices were 3.3% higher than a year earlier.
The figures are significant because the PCE price index is one of the primary inflation measures used by the Federal Reserve when assessing economic conditions. The Federal Reserve has a long-term inflation goal of 2%, making the latest annual inflation readings notably higher than that objective.
Household saving also increased during July. Personal saving reached $712 billion, while the personal saving rate rose to 3% of disposable personal income. The increase suggests that some households retained a portion of their additional income instead of directing all of it toward consumption.
Income growth was supported by several factors, including increases in employee compensation, government social benefits and income received from financial assets. These gains helped provide households with additional resources even as higher prices continued to affect purchasing power.
The latest information also came alongside an updated estimate of U.S. economic growth for the second quarter of 2026. Real gross domestic product increased at an annualized rate of 1.5%, according to the government’s second estimate. That figure was unchanged from the initial estimate and represented a slower pace of growth than the 2.1% rate recorded during the first quarter.
Consumer activity remained an important contributor to economic growth during the second quarter. Consumer spending increased at a 3.4% annual rate, helping support overall economic activity. However, other components of the economy, including trade, affected the final growth calculation.
For households, the latest data provide a mixed but relatively stable picture. Rising income can help consumers manage higher costs, but persistent inflation means that purchasing power continues to face pressure. The fact that real consumer spending was essentially flat in July also indicates that consumers may be becoming more cautious about the amount of goods and services they purchase.
For businesses, consumer demand remains an important indicator to watch. Continued income growth and spending can support retailers, restaurants, service providers and other consumer-focused industries. At the same time, elevated inflation can increase operating costs and influence how businesses approach pricing.
The data are also important for understanding the direction of the U.S. economy during the second half of the year. Economic growth remains positive, but the combination of moderate growth and above-target inflation presents a complicated environment for policymakers, businesses and households.
The most important takeaway from the August 26 data is that the U.S. economy continues to expand, but the recovery is accompanied by persistent price pressures. Household incomes are rising, consumer spending remains positive and savings have increased, yet inflation remains above the Federal Reserve’s long-term target.
For Americans and businesses across the country, upcoming reports on inflation, employment, consumer spending and economic growth will provide further clues about whether economic conditions are strengthening, slowing or remaining broadly stable. For now, the latest figures point to an economy that remains active and resilient while continuing to contend with elevated living costs.
Sources used for factual verification: U.S. Bureau of Economic Analysis and Associated Press.
