Reasoning
With the Federal funds target range held at 3.50 to 3.75 percent and an expectation of potential rate increases by year-end, consumer spending could be negatively impacted as borrowing costs rise. Additionally, historical patterns show that retail sales often decline during periods of monetary tightening. The June Consumer Expenditure report indicated reluctance among consumers to spend amid increased concerns about interest rates and inflation pressures, further suggesting a potential decline in retail sales in H2 2026.Key uncertainty
The pace of economic growth and consumer confidence, influenced by external factors such as geopolitical events or supply chain disruptions, could significantly alter spending behavior.