US retail sales slump unexpectedly and sharply after a summer tax-refund boost fades
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A person carries a shopping bag in Philadelphia, Dec. 10, 2025. /Matt Rourke, File)
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A display of a Bentley car at the Mall at Short Hills, in Short Hills, New Jersey, June 6, 2026, which has remained a premier luxury shopping destination for decades. / Anne D’Innocenzio)
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A person carries a shopping bag in Philadelphia, Dec. 10, 2025. /Matt Rourke, File)
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A person carries a shopping bag in Philadelphia, Dec. 10, 2025. /Matt Rourke, File)
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A display of a Bentley car at the Mall at Short Hills, in Short Hills, New Jersey, June 6, 2026, which has remained a premier luxury shopping destination for decades. / Anne D’Innocenzio)
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A display of a Bentley car at the Mall at Short Hills, in Short Hills, New Jersey, June 6, 2026, which has remained a premier luxury shopping destination for decades. / Anne D’Innocenzio)
By
ANNE D’INNOCENZIO
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NEW YORK (AP) — After splurging on the World Cup and Amazon Prime Day sales, Americans unexpectedly cut their spending in July by the biggest amount in more than a year
Retail sales fell 0.6% last month, marking the biggest decrease since May 2025, compared with a revised gain of 0.2% in June, according to the Commerce Department data released Friday. Economists were projecting a small increase
The decline followed a notable bump in spending in both April and May as Americans dipped into their generous government tax refunds
The drop in spending for July, however, raised concern among some economists about the resiliency of consumers who have powered the economy forward despite nagging inflation and soaring gasoline prices. Yet, it may be too early to declare a retreat by one of the strongest and most consistent forces in the U.S. economy of late
Still, the weak sales report follows unexpectedly sluggish jobs figures last week, and both suggest the economy could be slowing after strong consumer and business spending in the first half of the year
Consumers are grappling with persistent inflation that has pushed up prices faster than wages and they may have already exhausted generous tax refunds that helped offset rising costs
Separately, consumers turned more pessimistic about the economy this month, likely driven by stubbornly high prices, according to the University of Michigan’s consumer sentiment index, released Friday
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While most economists still expect solid economic growth in the July-September quarter, many have lowered their forecasts in the wake of the retail sales report
Prices in July, which were not adjusted for inflation, were impacted by falling sales at gas stations. Fuel prices remained low until later in the month when evidence of a stalemate between the U.S. and Iran in the Strait of Hormuz began to grow. Business at gas stations fell 0.9% last month, according to the report
Gas prices have been rising since the final week of July and ticked higher again overnight to $4.08 per gallon, up from $3.85 a month ago, according to motor club AAA. That’s 92 cents more per gallon than Americans were paying last year at this time
Gas prices typically begin to recede in August as the driving season comes to a close and the AAA said this week that the high cost of fuel for Americans this late in the year is unprecedented
Excluding sales at gas stations and auto dealers, retail sales in July fell 0.2%
Business at motor vehicle and parts dealers saw a 1.8% drop from a 1.9% increase in June, which was helped by auto makers’ promotion incentives
Electronics and appliance sales declined 0.5%. Online sales fell 2.2% from June when they were fueled by spending surrounding Amazon’s four-day Prime Day event that began in late June, earlier than previous years
The drop in online sales weighed heavily on the so-called control group—which excludes food services, autos, building materials and gas station sales and is used to calculate economic growth. That figure fell 0.4% last month
“American consumers are showing signs of fatigue, “ Heather Long, chief economist at Navy Federal Credit Union, wrote Friday. “July retail sales were disappointing on all levels.”
But the weak sales seemed to be concentrated in a few areas
Among some of the bright spots in the report: clothing and accessories stores, furniture and home furnishing stores as well as building material and garden supplies merchants all posted gains last month
The data offers only a snapshot of consumer spending and doesn’t include activities like travel and hotel stays. But the lone services category – restaurants – registered a healthy 0.5% increase
“Though the latest numbers warrant a downgrade to the spending forecast, it’d be premature to write off the consumer,” Bernard Yaros, lead U.S. economist at Oxford Economics said
New data this week showed that inflation declined slightly in July as gas and grocery prices slipped, though it is still rising more quickly than before the Iran war
Consumer prices increased 3.4% in July from a year ago, down slightly from 3.5% in June, the Labor Department said Wednesday. Inflation had fallen to 2.4% before the Iran war. On a monthly basis, prices rose just 0.1% from June to July
The modest decline marked the second straight decrease after sharply higher gas prices pushed inflation to 4.2% in May, a three-year high
Given the volatile economic environment, economists are closely watching how families spend behind Christmas
Shopping has been steady, though Americans have dialed in on sales as they grow more careful with their money
Off-price retailers, consumer electronics and office supply retailers have had a “strong early start” to the back-to-school season, said Elizabeth Lafontaine, director of research at Placer.ai
“Consumers have looked to take advantage of early deals to check off their lists,” Lafontaine said
Walmart, Target and other retailers have been pushing discounts for the fall season, seeking to lure inflation-weary shoppers
Target, for example, says that 95% of prices for school supplies are at or below last year’s levels
Retailers begin reporting quarterly earnings next week
Stephen Yalof, CEO of the outlet mall operator Tanger, noted an increase in foot traffic this summer because of the World Cup festivities
More Americans were shopping too, Yalof said, because more people are vacationing close to home to save money
“We’re rewarding with value, and we’re getting customers to come in … and shop more frequently,” Yalof told The Associated Press
AP Economics Writer Christopher Rugaber contributed to this report from Washington
ANNE D’INNOCENZIO
