Consumer Spending’s Fake Recovery: What This Week’s Retail Earnings Will Expose

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(SeaPRwire) –   By: Christian Pierce

Inflation’s slow cool hasn’t fixed consumer confidence. Shoppers are pulling back, even as the Fed hints at pausing rate hikes. This week’s retail earnings will lay bare the gap between macro data and real-world spending.

Walmart reports Thursday morning. It previously flagged shoppers “navigating financial distress” and cut prices to retain them. Investors will watch if this strategy stops sales from slipping. Target reports Wednesday. It posted same-store sales growth last quarter for the first time in over a year. But CFO Jim Lee warned weak confidence could slow its momentum. Home Depot reports Tuesday. It missed same-store sales targets last quarter, even as overall numbers were strong. Americans are delaying big home projects, so the chain is shifting focus to professional contractors.

The University of Michigan’s August survey showed consumers grew more pessimistic. The drop hit hardest among older, lower-income, and non-college households. Only 8% expect their income to outpace inflation next year. July retail sales fell 0.6% month over month, worse than the 0.1% gain analysts predicted. Moderate inflation improvement pushed markets to price 70% odds the Fed holds rates steady in September. Last week, the S&P 500 rose 0.4%, the Nasdaq 0.6%, and the Dow fell 0.6%. Other earnings this week include Lowe’s on Wednesday, Ross Stores and Deere on Thursday, and BJ’s Wholesale Club on Friday. Alibaba and Baidu are also on the calendar. Away from retail, Goldman Sachs estimates global AI data center spending could hit $1 trillion in 2026. JPMorgan puts U.S. spending at $697 billion, and Bank of America sees $1.2 trillion by 2027. But chip shortages, skilled labor gaps, and regulatory pushback slow build-outs. New York imposed a one-year moratorium, and Texas ordered a power audit. Bloomberg New Energy Finance predicts a 19-gigawatt power shortfall by 2035. One analyst says utilities may approve only 28% of power requests, partly due to “phantom” applications from operators. The Fed’s July meeting minutes come Wednesday, offering insight into policymakers’ rate thinking.

Retail’s split will widen in the coming quarters. Discount chains like Walmart will hold market share by leaning into low prices. Big-ticket retailers like Home Depot will struggle as consumers delay non-essential projects. Target’s recent growth will fizzle if confidence doesn’t rebound. For AI infrastructure, the $1 trillion spending target is a distant mark. Supply chain bottlenecks and regulatory hurdles will keep growth muted, despite investor enthusiasm. The Fed’s September rate decision hinges on this week’s earnings. Weak results will lock in a pause; strong numbers could reignite hike bets.

Author bio: Christian Pierce, a chief financial columnist and markets commentator with 15 years analyzing consumer trends and corporate earnings.