Consumer spending was flat in the US in August. Adam Lass says this zero means more than the much-hyped $700 billion figure currently grabbing the headlines.

The bottom line is consumers are running scared, and that is bad news for retailers and manufacturers.

Adam says Whirlpool (NYSE:WHR) and Sherwin-Williams (NYSE:SHW) are in for a particularly rough ride. Even ’safe’ stocks such as Sears (NASDAQ:SHLD) or Kohl’s (NYSE:KSS) could seriously hurt your portfolio in the coming months.

Still, if you dig a little below the facile headlines, you’d learn that the bailout may be sucking up all the air in the room, but that trillion dollars is NOT really this week’s big story. That is reserved for a lowly zero.

Because zero is the change in consumer spending from July to August.

The bright guys over at the Commerce Department were kind of hoping that spending would go up about 0.2%. That’s not much, but it would at least have been double the increase between June and July.

The Economic Stimulus Act of 2008 (remember that?) was supposed to have one of those multiplied effects wherein Joe buys from Fred, who in turn hires Mike, who takes Sadie out to dinner etc., etc.

Instead, there was no gain whatsoever, demonstrating quite clearly that dumping $152 billion into a system already overburdened with excess dollars wasn’t quite the cure Washington thought it might be.

Here’s another “small” figure that dwarfs that trillion-dollar package Congress is screwing around with: Excluding “volatile food and fuel” (snicker), prices increased 0.2% July to August, and 2.6% between August 2007 and August 2008. The latter is the largest spike since January 1995.

Run these “ tiny fractions” all the way through the system, and American disposable income fell 0.8% in July and 0.9% in August. To paraphrase Ross Perot, that loud snapping sound you hear is millions of pocketbooks, wallets and checkbooks snapping closed.

And it’s not going to get any better anytime soon. According to the latest Bloomberg economist survey, the last quarter of 2008 should be the worst in almost 20 years.

In a nutshell, all this horse hockey going on in Washington this week isn’t touching the underlying economic problems we are facing. In fact, if anything, it is only making them worse. And it’s scaring consumers to death.

My advice? Forget about anyone who makes washing machines… I am thinking Whirlpool (NYSE:WHR) here. I am not a big fan of anyone who makes house paint either. Here’s a hint: Run — don’t walk — away from a big coatings manufacturer like Sherwin-Williams (NYSE:SHW).

And I know that some folks are still warm to certain outfits like Sears (NASDAQ:SHLD) or Kohl’s (NYSE:KSS) that sell washing machines and house paint, and sweaters and khakis, too, for that matter.

Maybe they are right. Heck, if you are buying for the next decade looking for $300, you won’t care if you bought for $100 or $50.

But right now, that sort of drop looks like a 50% loss to me.

And this week, -50% trumps a trillion easy.

Source: Zero Growth Trumps Washington’s Trillion Dollars