Us spending remains robust despite the slide in sentiment

Key arguments

• August retail sales rebounded strongly, led by internet stores after an earlier-than-usual Amazon Prime Day distorted June and July.
• The control group rose much more than consensus, indicating broad robust consumer activity rather than a narrow bounce.
• The K-shaped consumer narrative holds: high-income households spend strongly on wealth gains while middle and lower income households are increasingly squeezed.
• Real household disposable income has been flat for 18 months, so households are saving less and rising credit card and auto loan delinquencies signal stress.

Corresponding source evidence

1. The control group, which excludes volatile items such as gasoline, restaurants, building materials and autos, rose 1.4% MoM – much better than the 0.5% consensus forecast.
2. Internet sales bounced back, rising 2.6% MoM – Amazon's Prime Day was earlier than usual this year, which boosted June sales at the expense of July (-1.7% MoM) and we saw a subsequent recovery in August. · this year
3. Meanwhile, middle and lower income households are increasingly being squeezed, with the University of Michigan sentiment measure suggesting households are the most anxious they have been for 50 years!