On Thursday, the focus of U.S. markets will shift from inflation to consumer health. Interest rates are tough, and some big companies, including Home Depot and McDonald’s, are reporting falling spending. Spending appears to be suffering the most in interest rate-sensitive areas so far, but could widen quickly if consumers hold back.

Evidence so far is mixed, with Apollo this week highlighting largely flat credit card spending among other signs of stability.

Here’s what to expect

• Control group retail sales (July):
  • Expected: 0.1%
  • Previously: +0.9%
• Retail sales excluding cars (MoM) (July):
  • Expected: 0.1%
  • Before: 0.4%
• Retail Sales (MoM) (July):
  • Expected: 0.3%
  • Back: 0.0%

The control group is always the main driver of the market, but it’s worth paying attention to the details too. Last month, non-store retailers (Amazon) saw an 8.9% increase year-on-year, and this category will be in focus again as Prime Day fell on July 16-17, although it is up compared to 2023’s Prime Day, which fell on July 11-12.

Aside from Hurricane Beryl, the weather was also favorable for purchasing decisions. In much of the US, it was neither overly hot nor stormy and there were many discounts.

Clothing is an interesting category right now, as it rose 0.6% m/m in June and 4.3% year-over-year. That could be a sign of a healthy wallet, but also a sign that the consumer has become healthier in another way – Ozempic. GLP-1 drugs are changing wardrobes and therefore could send the wrong message.

On the other hand, restaurants and grocery stores could be hurt by lower appetite. I wouldn’t expect this to show up over a month, but it’s a long-term trend that could make interpreting the overall signals difficult.

Control group for retail sales

Looking at the report, I think the market is balanced. The crash of early August has been reversed in the biggest four-day stock rally since November 2023. There is probably more to do, but it will depend more on the economy and less on the inflation outlook.

While the retail sales report will be Thursday’s highlight, it won’t be the only one. Shortly before the data release, we’ll get quarterly results and comments from Wal-Mart. The world’s largest retailer is often candid about its spending forecast and will surely be asked about trends on the conference call.

If I were forced to use either official retail sales data or WMT commentary, I would go with WMT, especially if it highlights any kind of changes.

John Furner, CEO of Walmart USA, said consumer spending was “remarkably consistent” in May.

“I think the best way to describe the consumer is that it has remained remarkably consistent over the last few years. The mix has changed, but not that much,” he said.

Has that changed? I suppose it’s at least partially woke, but Walmart shares are up 7% since June.