The American consumer could threaten corporate earnings

The second-quarter earnings parade is steaming up this week. But with economic indicators for the American consumer revealing less than enthusiastic figures, investors of companies dependent on consumer spending are anxiously awaiting quarterly results.

By many indications, the consumer has pulled back. The University of Michigan’s consumer sentiment index fell in early July. The reading came in at 93.3, missing expectations for 95.5. June retail sales figures took the markets by surprise by showing a disappointing drop in spending. The decline of 0.3% came as consumers curbed buying cars, clothing and home furnishings.

Despite the bearish data, Michelle Girard, U.S. chief economist at RBS is not giving up on the American consumer. “The U.S. consumer is in solid shape,” she said.

“We are seeing more people with jobs and…a better consumer spending pace than we’ve seen in any points of data in this expansion,” said Girard.

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The economist noted Americans are more “cautious when they spend. This isn’t like it was prior to the financial crisis, when everyone loaded up on debt and were free spending.” But Girard believes a more prudent consumer is healthy for the overall U.S. economy.

Investors may get a better sense of how consumers are feeling and spending when Amazon (AMZN) reports its quarterly results after the close on Thursday. The Street is expecting revenue of $22.3 billon, a few hundred million dollars above the company’s guidance of $21.7 billion. The e-commerce giant has giving brick and mortar retailers like Wal-Mart (WMT) and Best Buy (BBY) stiff competition with its price matching.

 

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