Consumer sentiment takes a tumble

Consumer sentiment took a tumble in the early part of August, falling for the first time in three months. That headline landed alongside a July retail sales report that was also down, and a national average gas price of $4.06 a gallon — nearly a record for this late in the year. The episode wove together these domestic warning signs with a slowdown in China’s consumer economy, a defense of GDP as a metric under political attack, and a handful of other developments from the bond market to the S&P 500’s latest addition.

Consumers are spending less, not collapsing

The July retail sales pullback was sharp, but economist Jeffrey Roach at LPL Financial cautioned it was a single month after a strong year. Still, there are real cracks. Hotel occupancy and TSA throughput — both leading indicators of consumer confidence — have softened. The job market has weakened, and wage gains are not keeping pace with inflation for most people. Only 8 percent of consumers believe their income growth will outpace inflation. “What we’re seeing is that consumers are expecting to be squeezed,” Roach said. “They’re not anticipating anything catastrophic.” The likely outcome is not a cliff dive in spending, but a gradual pullback. Consumers are trading down on discretionary items: cheaper options for big-ticket purchases like cars and furniture, and fewer trips to the movies — a family of four can ea