Macroeconomic Overview: Around the middle of June, a memorandum of understanding was signed between the U.S. and Iran that facilitated greater trade flows out of the Persian Gulf through the Strait of Hormuz. Since then, oil prices fell sharply. Brent crude prices were volatile since the onset of the conflict but averaged $95/barrel in the first half of June. Current prices are close to $70/barrel (-16% relative to early June). In the U.S., the national average for gasoline prices decreased from their recent peak of $4.35/gallon around the middle of May to current readings near $3.65/gallon (-16% relative to the middle of May).
Despite the recent decline in energy prices, official inflation data are lagged and the latest government readings are for May. In May, the overall CPI (+4.2% in May) posted the highest increase since April 2023. The recent surge in inflation pushed the rate of price increases beyond the rate of wage growth for the past few months (current wage growth has been near +3.5%). An implication of price rising faster than wages is mounting pressure on consumer finances that could weigh on future spending.
Overall consumer spending decelerated in recent months, with the rate of annual growth slipping below the longer-term average near two percent in several months since the start of the year. Apparel spending has also slowed but continues to grow at nearly twice its long-term average.
Employment: The U.S. economy is estimated to have added +57,000 jobs in June. This followed three stronger months of gains (+214,000 in March, +148,000 in April, +129,000 in May). Before March, change was weaker, with the average for the preceding six months -15,000 (August 2025 through February 2026). Revisions to existing estimates were negative, with the figure for April dropping -31,000 positions to +148,000 and the figure for May dropping -43,000 positions to +129,000. The current twelve-month average is +42,000.
The unemployment rate remained nearly unchanged at 4.2% in June (was 4.3% in May). It has been between 4.0% and 4.5% since the middle of 2024. Levels below five percent are low by historical standards.
Wage growth was steady near +3.5%, which is where it has been hovering for the past four months. This rate is lower than it was last year, when it was closer to +4.0%. With wages growing more slowly, and with inflation moving higher, the rate of price increases has been greater than the rate of income growth for the past 2-3 months (depending on the measure of inflation used).
Consumer Confidence & Spending: The Conference Board’s Index of Consumer Confidence® was nearly unchanged month-over-month in June (+0.6 points to 91.2). Since November, values have held within a narrow range between 90 and 95. Between 2021 and October 2025, the index generally ranged between 95 and 115.
Overall consumer spending growth was +0.2% in May. Year-over-year, spending was up +2.1% in May, which is above the levels in four of the past five months (was below two percent in December, March, and April and was +2.0% in January).
Although apparel spending has slowed from the rapid pace seen during 2025, it continues to outpace overall consumer spending. In May, apparel spending increased +0.6% (after back-to-back monthly decreases in March and April).
Year-over-year apparel spending was +3.5% higher in May. This is lower than the rates between five and ten percent that were registered throughout 2025, but still well-above the longer-term average closer to two percent.
Consumer Prices & Import Data: Average retail prices for apparel have increased in at least eight of the last ten months. Data are missing from October and November due to lapses in government funding, but month-over-month values have risen consistently risen since July 2025. Monthly increases in January and February were particularly strong, with the gains in each of those months greater than one percent. In May, the latest month with data available, clothing prices increased +0.2% relative to April.
Year-over-year, retail clothing prices were +4.8% higher. This is the strongest rate of annual increase since the volatility in the aftermath of the pandemic.
In recent decades, retail apparel prices have generally been flat or declining, making the recent acceleration particularly noteworthy.
The average cost per square meter equivalent (SME) of cotton-dominant apparel was $3.68/SME in May (latest available data, seasonally-adjusted, excluding tariffs). Year-over-year, average sourcing costs per SME were down -3.5%. Despite the recent year-over-year decline, sourcing costs remain +6.8% above their 2019 average (pre-COVID).