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The Commerce Department’s Census Bureau reported advance estimates showing US retail and food services sales totaled 763.6 billion dollars in July, a 0.6 percent decrease from the previous month. This marked the largest decline since May 2025 and reversed a 0.2 percent gain registered in June that went unrevised. Economists polled ahead of the release had anticipated a modest 0.1 percent increase instead.
Breakdowns from the same data placed the drop in sales excluding motor vehicles and gasoline at 0.2 percent while the so-called control group fell 0.4 percent. Gas station sales decreased 0.9 percent as average gasoline prices climbed to 4.08 dollars per gallon amid supply concerns tied to developments involving Iran. Offsetting some of the weakness, sales at restaurants and bars rose 0.5 percent with additional gains recorded in clothing and accessories, furniture and home furnishings as well as building materials and garden equipment.
Consumer sentiment deteriorated during the month with the University of Michigan index falling as households expressed heightened concerns over persistently elevated prices, according to a Reuters report on the survey. The weakness followed strong spending in the spring when tax refunds provided an extra lift to household budgets that has since been exhausted. Year-over-year sales remained higher by 5.0 percent even after the monthly pullback.
Economists have since revised down their projections for third-quarter economic growth in response to the softer spending figures. Goldman Sachs lowered its estimate by 0.5 percentage point to 2.2 percent while others followed suit, Reuters reported. Consumer spending constitutes more than two-thirds of US gross domestic product, amplifying the significance of the retail sales report for broader economic assessments.
Sal Guatieri at BMO Capital Markets said the data points to a material slowdown in real consumer spending growth in the third quarter. Carl Weinberg from High Frequency Economics added that unhappy consumers tend to buy less when sentiment is depressed. Such signals could weigh on expectations for Federal Reserve policy decisions in the months ahead.
The report arrives against a backdrop of moderating inflation that saw the annual rate ease to 3.4 percent in July from 3.5 percent the prior month with monthly prices advancing only 0.1 percent, according to related government figures. Some resilience persists in the economy with a still-balanced labor market and gains in household wealth from rising stock prices providing potential support for future spending. The Census Bureau left its estimate for the May-to-June change unrevised at an increase of 0.2 percent.
