The death of the US consumer has been greatly exaggerated

Thursday brings a double serving of good news about the US consumer – the $19-trillion gorilla that drives the economy.

Retail sales rose by 1% in the month of July; economists had been expecting a 0.4% increase. The so-called retail sales “control group” (a more narrow gauge of spending) rose 0.3% for the month, while analysts anticipated it to rise by just a tick.

Separately, Walmart posted better than expected earnings and boosted its full-year sales guidance.

Retail sales, of course, include only the physical items people buy. When we look at a broader range of spending on goods and services, the annual growth rate is more or less at its pre-pandemic pace.

Two-year Treasury yields are jumping in the wake of the spending data, up nearly 15 basis points as traders think the Federal Reserve won’t have to deliver as many rate cuts because the economy might be doing a little better than previously thought.

The message: Recession postponed.