What's going on?

Looks like Americans have been browsing the rails for comfort after a difficult year: data out on Friday showed US retail sales in June came in way ahead of predictions.

What does this mean?

Economists had been expecting sales to drop 0.3% last month from the month before, but boy were they off the mark: sales actually rose 0.6%. There were three reasons they were right to have been skeptical, mind you. First, the effect of March�s stimulus checks should�ve worn off, meaning shoppers would have less cash to spend on nice-to-haves. Second, record-high inflation means consumers could afford less with the same amount of money (all else being equal). And third, if shoppers were expecting prices to be higher in June and beyond, they might�ve front-loaded purchases in May that they would otherwise have waited to make. Put simply, economists might not be wrong, just a little premature…

Why should I care?

For markets: Numbers don�t lie, but they do fudge the truth.

Consumer spending on services � retailers, restaurants, bars, and so on � represents 70% of the US economy, so these strong sales are a massive driver of all-important economic growth. But while they do suggest consumers are happy to spend their money, average US disposable income (adjusted for inflation) is still at its lowest since before the global financial crisis. In reality, then, consumer spending power is falling. Throw rising wealth inequality into the mix, and economic growth looks at risk in the longer term.

The bigger picture: China stumbles.

Data out last week showed China�s retail sales were an expectation-busting 12% higher in June than they were the same time last year. But unlike the States, consumer spending only represents about 40% of the Chinese economy. The country�s overall economic growth, then, fell slightly short of forecasts in the second quarter, growing �just� 7.9% versus the same time last year.