U.S. consumers continued to open their wallets in July, a new study from the Bureau of Economic Analysis showed on Friday, underscoring the resilience of household demand even as inflation held above the Federal Reserve’s target.

That doesn’t mean that they didn’t wince while doing it.

The Federal Reserve’s preferred inflation gauge, the personal-consumption expenditures price index, rose 0.2% on the month and 2.6% from a year earlier.

The core measure, which strips out food and energy, advanced 0.3% from June and 2.9% from a year earlier, edging higher from June’s 2.8%.

The takeaway from that? Consumers are spending more but they still have painfully high inflation, an issue which primarily affects the working and middle class, who spend more on goods than on services.

So what were consumers buying?

Mostly larger items, which include everything from cars to stocks. What weren’t they buying? Things that were optional, like travel, restaurants, or services.

That’s probably because services are starting to cost a lot more.

Respondents polled by the University of Michigan said in a separate study that they expect prices to climb 4.8% over the next year. That is compared with 4.5% in July, with consumer confidence at the lowest level since the beginning of the summer.

Essentially everything is seeing its prices go up, from leisure to entertainment, and it will likely climb higher for anything imported.

That leads to the biggest undercurrent in both these reports: The looming implementation of prohibitively expensive tariffs put in place by the Trump administration in an ongoing trade war with essentially the entire world.

One of the sectors likely to be hit the hardest? Tech and anything that needs parts from abroad to make tech run, including chips, cheaper parts, and shipping.

Tech spending has stayed solid this year

Still, despite the pinch of recent inflation and its unwelcome twin shrink-flation, Americans have spent a lot on tech at a continuously high level throughout 2025.

The total U.S. tech spending forecast to hit $2.7 trillion in 2025, and the Consumer Technology Association predicting a record $537 billion in consumer technology purchases.

Some of that consumption might be tariff-proof.

This spending is evident in large, ongoing tech purchases, high mobile data consumption, and growing subscription services, though some specific costs like ad-supported streaming and internet are seeing slight decreases as consumers adjust to the economy.

That coincides with the data, as durable-goods purchases—everything from cars to appliances—posted their strongest monthly advance since March, rising 1.9% after back-to-back declines.

“Spending on durable goods rebounded in July, which may ease some tariff-related concerns,” Wells Fargo economists Tim Quinlan and Shannon Grein told CNN.

What other high points were there?

There is some good news for consumers, and that is mainly dependent on employment and how much of it you have and how much of it you make.

Personal income rose 0.4% in July, supported by stronger wages. But in a worrying sign,  spending outpaced income this report. That’s a signal that economists watch closely, because it means households may be dipping into savings to sustain purchases. The savings rate held at 4.4%.

“Consumers are solid for now, and goods inflation remains contained,” Chris Rupkey, chief economist at FwdBonds, told CNN. “The tariff war has yet to slow the economy appreciably or set off an inflation scare.”

Markets wavered after the report. Dow futures fell 0.21%, while S&P 500 futures slipped 0.23% and Nasdaq 100 futures declined 0.44%. Losses were pared after the release, in line with expectations for inflation.

So now we wait for the tariffs

Economists say the bigger risk is ahead. With tariffs filtering through supply chains, companies are gradually passing on higher costs.

“The real hit comes in the next six months,” Heather Long, chief economist at Navy Federal Credit Union, told CNN. She warned the U.S. could be entering a “stagflation-lite” phase, where we have slower growth paired with high inflation.

Unlike in 2022, when households still had a cushion of pandemic-era savings, consumers today are showing more resistance to price hikes. Businesses, facing higher costs, may begin trimming staff to protect margins.

“The Fed needs to cut in September and again in December,” Long said. “The inflation threat isn’t acute, but the risk of a layoff cycle is growing.”