US retail sales unexpectedly fell 0.6% in July, their steepest decline since May 2025, as spending linked to tax refunds, the World Cup and Amazon’s Prime Day faded, Commerce Department data showed.
The fall followed a revised 0.2% increase in June and was weaker than economists had forecast. It came alongside sluggish employment figures and declining consumer confidence, raising concerns that the US economy may be losing momentum after strong spending during the first half of the year.
Online sales dropped 2.2% after receiving a Prime Day boost in June, while sales at vehicle and parts dealers declined 1.8%. Gas station revenue fell 0.9% and electronics and appliance sales decreased 0.5%.
The closely watched control group, which excludes restaurants, vehicles, construction materials and petrol stations, fell 0.4%. However, clothing, furniture, home furnishing and building supply retailers recorded gains, while restaurant sales rose 0.5%.
Economists said the report warranted lower consumer spending forecasts but cautioned against concluding that American households were in a broad retreat. A relatively balanced labour market and continued spending by wealthier households could still support economic growth.
Inflation eased slightly to 3.4% in July from 3.5% in June but remained above the 2.4% recorded before the war with Iran. Meanwhile, petrol prices reached $4.08 per gallon, 92 cents higher than a year earlier, increasing pressure on household budgets.
Retailers are offering back-to-school discounts as inflation-weary consumers increasingly seek promotions and lower-priced goods. Major companies, including Walmart and Target, are due to report quarterly earnings in the coming week.
