What's going on?

Recent data on the US economy has turned sour relative to earlier this year (tweet this), and on Thursday that continued as figures showed that Americans shopped less in August than expected.

What does this mean?

August (versus July) saw the first month-to-month decline in sales of consumer goods since March. Sales were still up versus a year ago (about 2%), but the growth rate declined versus July. These so-called �retail sales� are important because they make up part of consumer spending, which has been the main source of economic growth in the US this year. If consumer spending starts declining significantly, it would almost certainly be a big negative for the overall economy. That doesn�t appear to be happening yet, but economists will be watching closely for signs of further weakness.

Why should I care?

The bigger picture: The economy is supposed to be improving right now � not weakening.
According to official figures, the US economy grew at the relatively meek pace of 1% (annualized) in the first half of this year. Economists have been predicting that it will pick up enough in the second half so that growth in 2016 will ultimately be the same as it was in recent years (i.e. about 2%) � but recent data paints a less optimistic picture.


For the markets: In the short-term, weak economic data might not be so bad for markets.

Markets sold off aggressively on Friday last week, apparently, due to fears of interest rates going higher. Remember, higher interest rates tend to create somewhat of a headwind for stocks. Weak economic data makes higher interest rates less likely because the central bank is usually more hesitant to make things tougher for the economy if the environment is already weakening. For that reason, soft data, like Thursday�s retail sales, could be a positive for stocks (but in the longer-term, a stronger economy is likely needed to drive stocks higher).