Retail sales in the United States declined by 0.6% in July compared to the previous month, marking the steepest drop since May 2025, according to the Commerce Department. This decline follows a modest increase of 0.2% in June and comes in below the 0.1% gain that economists had projected in a poll by data firm FactSet.
Key Details
The decrease in retail spending, which accounts for about two-thirds of economic growth, reflects growing consumer fatigue. Heather Long, chief economist at Navy Federal Credit Union, noted, "American consumers are showing signs of fatigue." Sales at gasoline stations fell 0.9% in July, coinciding with a drop in energy prices, which contributed to the overall decline. Even when excluding gasoline sales, retail spending remained down 0.6%.
Online sales experienced a significant decline of 2.2%, the largest drop among all categories, while car dealership sales fell by 2%. However, spending at restaurants and bars increased by 0.5% during the same period. The reports indicate that the boost from larger tax returns earlier in the year has faded, and higher energy prices are impacting consumer budgets.
Background
Consumer sentiment also took a hit, with a report from the University of Michigan showing an 8% decline in early August, resulting in a preliminary reading of 51. This drop ends a two-month streak of rising sentiment and suggests that consumers are increasingly concerned about persistent high prices.
Related coverage: Wall Street Mixed as Retail Sales Data and Tensions Weigh, UK House Prices Rise 0.1% in July Amid Market Caution.
The decline in retail sales could lead to a slowdown in economic growth, affecting sectors such as consumer discretionary and retail stocks. Investors may react to the weakening consumer sentiment and spending, which could influence Federal Reserve policy decisions on interest rates.
Watch for upcoming economic data releases, including next month's retail sales figures, which will provide further insight into consumer behavior and economic momentum.
Based on reporting by: edition.cnn.com, us.cnn.com