July 2026 Economic Recap

by Kate Ledford, Monday, August 3, 2026

Each month, Kate Ledford breaks down the key economic developments shaping financial markets and the broader lending landscape. Here's a look at the trends that defined July 2026 and what they could mean in the months ahead.

U.S. Economy Shows Slower but Resilient Growth

During July 2026, the U.S. economy continued to grow at a moderate but slowing pace as persistent inflation and global uncertainty weighed on households and businesses.

Second-quarter GDP grew at an annualized rate of approximately 1.5%, which was weaker than expected. AI-driven business investment continues to anchor growth, and consumer spending held up with an extra boost from summer travel and the FIFA World Cup.

Inflation Remains Elevated Despite Signs of Cooling

Inflation remained the dominant worry, easing modestly in June but still remaining well above the Federal Reserve's 2% target. Energy prices climbed as rising oil prices tied to the escalating U.S.-Iran conflict pushed investors to raise bets on a rate hike later in the year.

Federal Reserve Holds Rates as Markets Price in Future Hikes

Against that backdrop, the Federal Reserve voted 9-3 to hold rates steady, with the three dissenters favoring a hike. Markets now anticipate between one and two rate hikes by the end of the year.

Labor Market Softens as Hiring Slows

The labor market continued to cool beneath an otherwise resilient surface as World Cup-related hiring unwound, leading to substantial job losses in the hospitality sector.

July 2026 Economic Outlook: What to Watch Next

Overall, July was characterized by an economy that remained resilient despite slowing growth, stubborn inflation, and heightened geopolitical risks that created uncertainty about the outlook for the remainder of 2026.

As the second half of the year unfolds, markets will continue to watch inflation, Federal Reserve policy, labor market trends, and geopolitical developments for clues about the direction of the economy. We'll continue to monitor these indicators and provide timely insights in next month's Economic Recap.

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