July retail sales fell. On the headline, that sounds bad. But strip out the distortions, and the three-month trend in real spending is running at a 3.1 percent annual pace. Consumption is holding up.

At the same time, real wages, what your paycheck actually buys after inflation, slipped again last month. The average worker earned less in purchasing power than the month before. That tension, spending firm, paychecks squeezed, is the thing worth understanding right now.

Because those two facts cannot coexist forever. One of them eventually gives.

Where the money is coming from

When wages are not keeping up with prices, households fund spending some other way. They draw down savings, they borrow, or they spend wealth they have built in stocks and homes.

Consumer credit growth stands at 2.4 percent year over year, which is measured. Household debt payments as a share of income sit at 11.16 percent, elevated but not at a level that historically precedes a crash in spending. So borrowing is part of the story, but a modest part.

The bigger part is wealth. Stocks are up 1,702 percent from a 1990 baseline. Home values are up 67 percent from that same starting point. Upper-income households are spending off those gains, and that spending flows through the retail data everyone reads.

The less comfortable piece: the savings rate has fallen to 2.7 percent. When households are running lean on savings and relying on asset values to fund consumption, the spending looks resilient right up until it stops looking resilient.