Retail sales in the United States fell by 0.6% during July, marking the steepest monthly decline since May 2025, according to Commerce Department data released Friday. The decrease surprised economists who had anticipated a modest gain, following a revised 0.2% increase in June. The pullback came after a notable surge in consumer spending during April and May when Americans received government tax refunds and spent heavily on items including World Cup-related purchases and Amazon Prime Day promotions.
The weaker retail performance has prompted questions from some economists about consumer resilience amid persistent inflation and elevated fuel costs. However, observers cautioned against drawing premature conclusions about a broader retreat in consumer spending, which has remained a key driver of economic growth. The sales decline, combined with recent weak employment figures, suggests the economy may be moderating following robust consumer and business activity in the first half of the year. Consumer sentiment also deteriorated in the period, with the University of Michigan’s confidence index falling, likely reflecting continued concerns about high prices.
Gasoline station sales declined 0.9% in July as fuel prices remained relatively stable until late in the month, when geopolitical tensions concerning the Strait of Hormuz began driving prices upward. Gas prices have risen significantly since the month’s final week, reaching $4.08 per gallon by early August, a substantial increase from $3.85 one month prior and 92 cents higher than the same period last year. Energy analysts noted the current pricing level is unprecedented for this late in the summer season.
Excluding gas stations and auto dealers, retail sales declined 0.2% in July. Motor vehicle sales fell 1.8%, while electronics and appliances declined 0.5%. Online retail fell 2.2% after benefiting from Prime Day promotions in June. Conversely, clothing, furniture, and building supplies all posted gains. Restaurants reported a healthy 0.5% increase, providing a bright spot in the services sector.
Economists have begun revising growth forecasts downward, though most anticipate solid expansion in the July-September quarter. Some analysts noted that wealthy households continue spending due to stock market gains, and the labor market remains relatively balanced. Consumer price inflation moderated slightly in July to 3.4% annually from 3.5% in June, though it remains elevated. Retailers are preparing for back-to-school and holiday shopping seasons by offering increased discounts to attract budget-conscious consumers.
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