Consumer Spending Posts Smallest Gain in Seven Months: Is the US Economy Slowing?

In July, consumer spending posted its weakest rise in seven months, signaling a loss of momentum in the US economy.

Spending Deceleration Echoes in PMI Readings

■Growth slowed to 0.2%, well below the prior month's 0.5% increase.

■The Chicago Fed National Activity Index (CFNAI) slipped to -0.1.

■Manufacturing PMI fell to 51.3, while Services PMI held at 53.1.

LME Inventories and China’s Industrial Appetite

■Copper inventories dropped 2.1% to 3.2 million tonnes, hinting at waning demand.

■Aluminium stocks fell 1.8% to 1.9 million tonnes; China’s factory production index slid to 48.7.

■The People’s Bank of China’s policy rate at 2.75% could further suppress demand.

Market Reactions and Rate Outlook

■The S&P 500 slipped 0.4%, with technology stocks bearing the brunt.

■10‑year US Treasury yields steadied at 4.12%, keeping the Fed’s rate‑hike expectations high.

■In FX, USD/EUR climbed from 1.07 to 1.09.

Forward‑Looking Risks and Opportunities

■Consumer confidence fell to 78, suggesting retail sales could contract 1.5% in the next quarter.

■The slowdown in industrial metal demand poses margin‑compression risks for aluminium producers Kaiser Aluminum and Alcoa.

■Yet, if the Fed maintains its policy range of 5.25‑5.50% and reins in inflation, long‑term fixed‑income assets may see renewed inflows.

Sinan Kılıç – Industrial Metals and Supply‑Chain Analyst: "The dip in consumer spending aligns with shrinking LME copper and aluminium inventories, indicating a broader pullback in industrial demand. China’s factory slowdown adds further pressure on global metal prices. The key variable remains the Fed’s monetary stance; a continued tight policy could elevate risk aversion and tighten liquidity, further challenging metal markets. Investors should hedge short‑term demand weakness while keeping an eye on long‑term infrastructure and renewable‑energy projects that will sustain metal demand. Diversifying portfolios across these themes will be essential."