The U.S. Commerce Department reported yesterday that consumer disposable income (the money consumers have left over after taxes) rose only 0.1% in July -- the smallest gain since November 2002.

The savings figures released yesterday show U.S. consumers posted a personal savings rate of only 0.6% in July -- the lowest since December 2002.

As I've been writing often in my PROFIT CONFIDENTIAL commentaries, it is my view that U.S. consumers, the real engine behind growth in America, are trimming their spending habits. Yesterday's report from the Commerce Department confirms consumers are neither experiencing the growth needed in disposable income to sustain spending, nor do they have savings to spend.

The makers and suppliers of the goods and services marketed to consumers are definitely feeling the pinch. CNW Marketing Research in Oregon reported the average incentive per vehicle sold in the U.S. in the first half of July was $3,991 -- up almost 10% from the previous month.

Last week, Wal-Mart reported weaker-than-expected sales growth at its stores. Year-over-year to August, Wal-Mart is basically saying consumer buying is flat. But the real story is in the retail stocks. All the major retail stocks listed on the NYSE, except for the odd exception, topped out months ago.

The bond market reacted positively yesterday to the news that disposable income rose only marginally. Of course, the bond market thinks this news will temper the Fed's actions when it comes to raising interest rates down the road. Based on interest rate futures, the market is saying there is an 80% chance the Federal Reserve will raise rates by 25 basis points (one-quarter percent) when it convenes in September.

So there you have it: The figures now clearly show consumers have cut back on the pace they were previously spending. And the percentage of what consumers have to spend (disposable income), which should be rising, has not really changed in a year. What would have happened if President Bush didn't cut taxes? Would disposable income actually have fallen from last July to this July? Wouldn't that be deflationary? But we don't have to worry... the Fed is raising interest rates again in September. What comfort.