Consumer spending, or a lack thereof, has been one of the key missing elements to the economic recovery. Unfortunately, that trend continued in July as core retail sales (excluding autos and gasoline) slipped for the second time in the last three months. Of course, any rebound in consumer spending is going to be muted by the fact that households are: 1) saving a measurably higher percentage of their disposable incomes; and 2) working their way out from underneath a mountain of debt accumulated in recent years. In addition, a weak labor market is not fostering a lot of confidence or certainty among households either, as the unemployment rate remains well above 9 percent and a significant chunk of the labor force has been out of work for more than 6 months. At some point, consumers will emerge from their fallout shelters and the combination of rehabilitated household balance sheets and pent-up demand should result in solid spending growth; however, until that time arrives, expect more reports like this one.

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