US consumers are are cutting back on retail purchases in anticipation of increasing interest rates.
Given that consumer spending is over ⅔ of our economy, this ain't good.
American consumers have powered the economy forward this year. In July, they took a breather.
Why it matters: While the underlying trend in consumer demand appears solid, retail sales hit an air pocket last month, suggesting a bumpier path ahead for overall growth.
- Combined with a weak jobs report last week and two subdued inflation readings this week, it points to the Federal Reserve having room to be patient on potential interest rate increases this fall.
Driving the news: Retail sales fell 0.6% in July, the weakest performance in more than a year and well below the 0.1% gain analysts expected.
- Excluding gas stations and auto dealers, there was still a 0.3% decline in sales, meaning that the weakness was evident even apart from those volatile categories.
- Auto dealers' sales were down 2%, gasoline stations' sales fell 0.9%, and electronic and appliance store sales declined 0.5%.
This is not looking good.
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