US retail sales fell 0.6% in July, missing forecasts for a small increase and marking the sharpest monthly drop since May 2025. Cheaper gasoline and a July slump in online spending after June's early Amazon Prime sale drove most of the decline, while economists say the report strengthens the case for the Federal Reserve to hold interest rates steady in September.
Retail sales post sharpest drop in 14 months
Sales at US retailers dropped 0.6% in July, defying Wall Street's forecast for a small increase and posting the largest decline since May 2025. The headline figure also missed the +0.1% consensus tracked ahead of the release, following a prior reading of +0.2%.
The weakness ran beyond autos. Sales excluding vehicles fell 0.3% against a forecast for 0.2% growth, and stripping out both autos and gasoline still left sales down 0.2%. That pattern, ActionForex noted, suggests the weakness extended beyond volatile categories. Motor vehicle and parts sales fell 1.8% m/m, while electronics sales slipped 0.5% and spending at non-store retailers dropped 2.2%.
Cheaper gas and an early Amazon Prime sale distort the picture
Much of the July slump traces back to timing rather than a sudden pullback by consumers. This year's Amazon Prime sale landed in June instead of July, so internet sales boomed the prior month and then slumped 2.3% in July once the event had passed. Internet sales are still up 8% over the past year. Gas-station receipts also slid almost 1% last month as fuel prices eased, trimming the headline figure further.
Total retail and food-services sales rose 5% year-over-year, somewhat above the long-term average, though the report is nominal and not adjusted for inflation. Sales at bars and restaurants rose 0.5% for a fourth straight month of gains.
Fed seen holding rates steady in September
The soft print adds to a run of data that argues against another rate increase. Weak July payrolls already stoked concern over the labor market, and this week's inflation prints reduced the urgency to tighten policy further. Economists caution that one soft month does not establish a downturn, but a second weak reading in August would strengthen the argument for the Fed to stay patient.
According to Regions Financial chief economist Richard Moody: "There are few signs that consumer spending is wavering." Low unemployment and low layoffs continue to support household spending even as higher prices raise the cost of living.
Sources: U.S. Census Bureau, Investinglive, ActionForex
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