Nominal retail sales grew for the first time in three months, climbing 0.4% in July. Likewise, core retail sales surged another 0.2%, to record a rise in seven out of the past eight months. But don't let these upticks fool you, the bigger picture paints a less optimistic retail trade scene.

Not only do these figures fall below their forecasts, but the decreasing rate of growth seems to be hinting at a slowdown. You see, recent weekly retail sales figures have been on a decline, and year-on-year gains have been going downhill, too.

More and more, it's starting to look like the eight-month surge in retail sales was only a minor correction of the 2008 financial meltdown. Is it just a matter of time before retail trade takes another plunge?

Let's take a look at what the core version of the report has to say. Digging deeper into the core retail sales report would reveal that most of the components fell. While minor components like restaurant and internet sales gained slightly, electronic, clothing, department stores, food and beverage sales all showed significant declines.

The softness seen in July's retail sales report clearly implies that consumer spending will continue to slow in the following quarters. Allow me to dramatically illustrate what I think of the US retail sales report...

Now, if we were to couple the weak retail sales and consumer spending with the measly 0.1% increase in July's consumer price index and elevated unemployment, then we've got a pretty strong case for deflation in the US.

I don't know about you, but it looks like the Fed's call for "Quantitative Easing: Round Two" is a very good move. Score for Bernanke and his boys!

Remember last week when I talked about how the Fed decided to keep QE rolling? That just means that the hotshots up there at the Fed wanted to keep their stimulus measures in place, hoping that these could boost economic activity. On top of that, they'd also have a better chance at warding off deflationary pressures with an abundant money supply. I guess tightening measures are out of the question for the meantime!

Does this mean that the US economy could expect another "kick" in terms of economic growth, the way it did when the Fed unleashed the first wave of easing measures way back in 2009? Didn't their economy leap from more than a year's worth of negative GDP readings to an eye-popping 5.6% growth in the last quarter of 2009?

I'm inclined to think that the effect of these QE measures would be less impressive now. After all, these current moves are simply aimed at keeping their economy afloat. But even with these easing policies still in play, an economic recovery is not yet set in stone.

The weird thing is that the US dollar could actually enjoy feeding off all this uncertainty. Thanks to its safe-haven appeal, the dollar thrives in this market environment filled with risk aversion. Ironic how the US currency gains when their economy seems to be in a rut, huh?