The consistently inconsistent consumer is the gift that keeps on giving for doves at the Federal Reserve.
As the U.S. central bank prepares liftoff after nearly seven years of anchoring its key interest rate near zero, there's still plenty of hesitance and in some quarters downright resistance to normalizing policy. The more rate hike-resistant members, such as Chicago's Charles Evans, are wary of tightening before the Fed sees clearer evidence that its economic targets, particularly inflation, are closer to being met.
That dovish view got a significant push Tuesday from less-than-inspiring retail sales for June, which declined 0.3 percent from May.
A month after the data point hit a multi-year high came results indicating that consumers remain hesitant to part with their cash and spur the kind of recovery the Fed is looking for. (Tweet This)
"The consumer 'resurgence' has been called into question with a decisively weaker-than-expected spending report at the end of Q2," Lindsey M. Piezga, chief economist at Stifel Fixed Income, said in a note. "Not only did June spending drop back into negative territory, but much of the strength in previous months was lessened, re-establishing the clear declining trend in consumption."
Indeed, retail sales present a post-financial crisis economic microcosm—enough strength to dismiss fears that another recession may take hold, but with an inability to sustain momentum.