The economy is on firmer footing than previously thought: Blowout consumer spending last month shows shoppers are not pulling back in a way that would be consistent with a recession.

Why it matters: The "consumer slowdown" narrative fell apart last month. If it continues, that — along with receding inflation — could keep the soft landing alive.

By the numbers: Retail sales surged 1% in July, well above the 0.3% increase economists expected. That's the biggest pop in retail sales since the beginning of last year.

• It was a strong rebound from the 0.2% decline in June, which was revised lower from initial data showing that retail sales were flat.
• The auto sector was responsible for much of the spending jump last month. Sales rose over 3% — about as much as sales fell in June when a cyberattack froze operations for car dealers.
• Consumers also upped spending at electronics shops (+2%), supermarkets (+1%) and building material stores (+1%). Sales fell most in the catch-all category for miscellaneous stores (-2%) and sporting goods retailers (-1%).

Zoom in: The "control" group that excludes autos (as well as gas and building materials) rose at a solid pace: 0.3% in July, after a 0.9% gain the previous month.

• Economists watch this narrower cut of the retail sales data since it feeds into the consumer spending category of the all-important GDP report.

What they're saying: "If these results are not changed in the coming months, it is clear that the U.S. consumer was 'alive and well' at the start of the third quarter of the year," Raymond James chief economist Eugenio Alemán wrote in a note.

• The "market overreaction several weeks ago is not supported by economic conditions from the largest sector of the economy, the U.S. consumer," Alemán added.

The intrigue: Walmart, the nation's largest retailer, said on its earnings call this morning that the American consumer is holding up fine — an observation that could tamp down the gloom-and-doom economic talk.

• "So far, we aren't experiencing a weaker consumer overall," CEO Doug McMillon said on the call.
• "Things have been remarkably consistent — I know everyone is looking for some pieces of information that maybe indicates further weakness with our members and our customers. We're not seeing it," CFO John David Rainey later added.
• Executives also said that Walmart lowered prices at its namesake stores and Sam's Club locations, more evidence of cooling inflation.

Even some of the top Fed officials most wary about interest rate cuts look to be getting on board.

Driving the news: Atlanta Fed president Raphael Bostic told the FT's Colby Smith yesterday that he would be open to a rate cut in September.

• That was a turnaround from just 24 hours earlier: On Tuesday, Bostic said that he needed to see "a little more data" before he could support an interest rate cut at the central bank's next policy meeting in September.
• The encouraging inflation report out yesterday seemed to be the reason for the switch. "I have to say, the numbers that have come in in the last several months have given me greater confidence that we're sustainably on that path," Bostic told the FT.

St. Louis Fed president Alberto Musalem signaled today that he would support cutting interest rates in September.

• It's only the second time Musalem, who took up the post in April, has made substantive public remarks on monetary policy.
• The last time was in June, when Muselam said he "needed to observe a period of favorable inflation, moderating demand and expanding supply" before becoming confident about cutting rates.
• "These conditions could take months, and more likely quarters to play out," he said at the time.

But today, Musalem hinted an interest rate cut looks imminent. "The time may be nearing" for a rate cut, he said.