What matters is how much stuff people purchased -- which was virtually unchanged from May to June
Today, Yahoo's homepage featured the grim Associated Press headline "Americans cut spending for first time in 20 months." I'm not one to flinch at bringing to light bad news about the economy, but in the sense that really matters, AP's assertion isn't that meaningful. Although nominal spending may have declined for the first time in 20 months, real spending -- adjusted for inflation -- was virtually flat, after having already declined over the prior two months.
Here's a chart that shows the change in real personal consumption expenditures from the Bureau of Economic Analysis:
As you can see from the chart, real spending actually fell back in April -- when the recovery began to show some clear signs of deterioration. Since then spending has continued to decline. But in June, it was actually the closest it's been in three months to growing again. It was -0.03%. That rounds to being approximately flat. This isn't great, but it also isn't as bad as the contraction we saw in April or May -- and it certainly doesn't warrant a splashy negative headline.
Why look at real spending instead of nominal spending? Real spending better shows how much actual stuff (goods and services) Americans purchased. Think about it: what's a worse sign, if you spend $25 less than you did last month (but buy the same amount of stuff) or if you buy less stuff than you did last month (but spend more actual dollars doing so)? The latter would indicate a clear effort to cut consumption, while the former could merely be a result of declining prices. The first scenario is exactly what happened in June: inflation dropped so Americans spent less money to purchase approximately the same amount of stuff that they bought in May. Firms didn't see materially fewer sales, and Americans didn't consume less.