Consumer spending has been like oxygen to the American economy over the last 18 months, keeping businesses and their workers breathing as we navigate through this difficult downturn. But the chorus of forecasters calling for a slowdown in that spending growth keeps getting louder, and if the Bureau of Economic Analysis's report on July consumer income and outlays is any guide, those predictions may be coming true.

To be sure, the BEA's July report on Personal Income says nothing at all about a spending slowdown. In fact, the report of a 0.8 percent increase in inflation-adjusted consumer spending in July represents a significant increase in our national appetite for goods and services. It’s the fuel for that fire, namely, personal income, that is showing signs of being spent.

The months of flat job growth and declines in weekly hours across the economy are starting to show up in earnings. Consumer income was essentially unchanged in July, as modest increases in proprietor and farm income were offset by declines in earnings. That's quite a change from the 0.7 percent monthly increase registered in June, and the 0.4 percent monthly increase averaged economy-wide since February.

The spending increases for July thus came at the expense of saving, which tumbled down to 3.4 percent from the 4.2 percent rate attained in June. In any given month, such variability is to be expected. But pinning the economy's future on the hope that consumers will continue to spend at full sail when income growth stagnates is not realistic. If anything, we can expect savings rates to drift upward until the balance sheets and fundamental economic security of households across the country improves.

What is missing in this recovery is a pickup in business spending, and, to some extent, a rebound in the stock market. Both have historically led the economy out of recession, although the traders on Wall Street have always been on a much looser leash. Cost containment rarely creates new jobs or fattens payrolls, as the laggard performance of the labor market in recent months shows us all too well. It takes business expansion and new investment to make that happen, and it has yet to arrive.

In the meantime, consumers continue to spend, at least for now. In fact, the bullishness of the American consumer in the teeth of economic and non-economic adversity continues to surprise us all. Five years ago, the idea that the economy could be teetering on the brink of a double-dip recession at the same time as the housing and motor vehicle industries were enjoying brisk sales would have been inconceivable. That fact that we live in that situation today only demonstrates how hard once-glamorous industries like telecommunications, computers, and business services have been hit.

If consumers are the best forecasters of the future, then their heady spending tells us that fears of a second downturn in the economy are overblown. But if a course correction in spending growth is just around the corner, the rest of the economy had better be prepared to take up the slack.