US retail sales fell unexpectedly in July, marking their first monthly decline in nine months and adding to signs that consumer spending may be losing momentum at the start of the third quarter. Retail sales declined 0.6% in July after increasing 0.2% in June, according to data from the US Commerce Department's Census Bureau.
The fall was the biggest in 14 months and sharply missed economists' expectations of a 0.1% increase. On a year-on-year basis, however, retail sales were still 5% higher than in July 2025.
The weakness was broad across several major categories. Non-store retailer sales fell 2.2%, while sales at motor vehicle and parts dealers declined 1.8%.
Electronics and appliance stores recorded a 0.5% drop, and receipts at gasoline stations fell 0.9%, partly reflecting lower fuel prices.
The July pullback also reflected some temporary factors. The boost from large tax refunds earlier in the year had faded, while Amazon moved its Prime Day event from July to June, bringing forward spending that would normally have appeared in July. Other retailers also shifted promotional activity earlier.
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Core retail sales also disappoint
A measure that excludes automobiles, gasoline, building materials and food services, and which more closely tracks the consumer spending component of GDP, fell 0.4% in July. Economists had expected this measure to rise 0.3%.
Still, some areas of consumer demand remained resilient. Clothing store sales rose 1.9%, helped by back-to-school shopping, while spending at restaurants and drinking places increased 0.5% following a 0.4% rise in June.
The data could influence the Federal Reserve's interest-rate outlook. Alongside weaker employment data and subdued inflation readings, the retail sales decline has strengthened market expectations that the Fed may keep rates unchanged in September. According to the CME FedWatch tool, the odds of a rate hike in September has slipped to 30.6%, whereas over 69% of the market is pricing in another hold.
Consumer spending had grown at a 3.2% annualised rate in the second quarter, while the US economy expanded at a 1.5% pace. The July figures now raise questions over how strongly household demand will support growth in the third quarter.
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