NEW YORK — Major U.S. retailers are heading into an important earnings week as investors look for evidence that American consumers are still willing to spend despite persistent inflation and higher costs.

The latest government data showed retail sales fell 0.6% in July, the sharpest monthly decline since May 2025 and significantly weaker than economists had expected. Online sales declined 2.2%, while auto-related purchases also fell.

The figures have increased attention on upcoming results from Walmart, Target, Home Depot and Lowe's. Investors will be watching not only revenue and profits but also management commentary about customer behavior, pricing and the remainder of 2026.

Retailers are increasingly competing for price-conscious consumers, with discounts and promotions becoming an important tool as households face elevated prices.

At the same time, weaker consumer spending could eventually reduce inflationary pressure and influence expectations for Federal Reserve interest-rate policy. Markets have already reduced expectations for another near-term rate increase following softer economic data.

The coming retail earnings reports could therefore offer one of the clearest snapshots yet of whether the U.S. consumer is slowing down—or simply becoming more selective about where and when to spend.