US Retail Sales Fell 0.6% in July as Consumer Confidence Declined

Americans pulled back on retail spending in July as consumer confidence also declined, raising concerns about the strength of consumer spending in the US economy.

The Commerce Department reported Friday that retail sales fell 0.6% in July from the previous month. It was the steepest monthly decline since May 2025 and followed a 0.2% increase in June.

A separate University of Michigan survey found consumer sentiment dropped about 8% early this month to a preliminary reading of 51, ending a two-month streak of gains.

Consumer spending accounts for about two-thirds of US economic growth, making the latest data significant for the broader economy.

Several retail categories recorded declines in July. Gas station sales fell 0.9%, while online sales dropped 2.2%, the largest decline among retail categories. Car dealership sales fell 2%. Restaurant and bar spending, however, increased 0.5%.

Economists said some of July's decline may have been influenced by major shopping promotions, including Amazon Prime Days, Walmart+ and Target Circle deals, which took place in June.

Retail sales were still 5% higher in July than a year earlier, although the pace of growth has slowed.

The University of Michigan survey found concerns about high prices remained widespread. Consumer sentiment declined particularly among older and lower-income consumers and people without college degrees.

The labor market could play an important role in determining whether consumer spending continues to weaken. Employers shed 23,000 jobs in July, while the labor force participation rate fell to its lowest level since 1976 outside of the pandemic. The unemployment rate remained relatively low at 4.1%.

Weaker consumer spending could also influence the Federal Reserve's decisions on interest rates as officials weigh inflation against the health of the labor market.

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