NEW YORK (AP) — After splurging; world cup Americans unexpectedly cut their spending in July by the most in more than a year, thanks to Amazon Prime Day sales and Amazon Prime Day sales.
Retail sales fell 0.6% last month, the biggest decline since May 2025, compared with a revised 0.2% increase in June, according to data released Friday by the Commerce Department. Economists had expected a modest increase.
The decline followed a notable increase in spending in both April and May as Americans soaked in generous government tax refunds.
But the drop in spending in July raised concerns among some economists about the resilience of consumers, which has propelled the economy forward despite persistent inflation and high gas prices. But it may be too early to declare a retreat from one of the strongest and most consistent forces in the American economy these days.
Still, the weak sales report comes after last week’s unexpectedly weak jobs report, both of which suggest the economy could slow after strong consumer and business spending in the first half of the year.
Consumers are suffering from persistent inflation that is pushing up prices faster than wages, and may have already used up generous tax refunds to offset rising costs.
Separately, consumers expressed more pessimism about the economy this month, likely due to persistently high prices, according to the University of Michigan Consumer Confidence Index released Friday.
Most economists still expect strong economic growth in the July-September period, but many have revised their forecasts downward following the retail sales report.
July prices, not adjusted for inflation, were affected by lower gas station sales. Fuel prices remained low through the second half of the month, with evidence of a continuing standoff between the US and Iran. Strait of Hormuz It started to grow. According to the report, gas station business decreased by 0.9% last month.
Gasoline prices have been rising since the last week of July, rising again to $4.08 per gallon overnight from $3.85 a month earlier, according to Motor Club AAA. That’s 92 cents more per gallon than Americans were paying at this time last year.
Gasoline prices typically start dropping in August as the driving season draws to a close, but AAA announced this week that the increase in fuel costs for Americans this year is unprecedented.
Retail sales, which exclude sales at gas stations and car dealerships, fell 0.2% in July.
Sales at auto and parts dealers fell 1.8% from June’s 1.9% increase, helped by promotional incentives from automakers.
Sales of electronic equipment and home appliances decreased by 0.5%. Online sales fell 2.2% from June, boosted by spending around Amazon’s four-day Prime Day event, which began in late June earlier than usual.
The decline in online sales weighed heavily on the so-called control group, which excludes sales of food services, autos, building materials and gas stations and is used to calculate economic growth. It fell 0.4% last month.
“American consumers are showing signs of fatigue,” Heather Long, chief economist at Navy Federal Credit Union, said Friday. “July retail sales were disappointing on every level.”
However, the slump in sales appears to be concentrated in some regions.
Some of the bright spots in the report were clothing stores, accessories stores, furniture stores, home decor stores, and building materials and garden supply retailers all posting profits last month.
This data only provides a snapshot of consumer spending and does not include activities such as travel or hotel stays. However, restaurants, the only service sector, recorded a healthy 0.5% increase.
“The latest numbers justify a downward revision to the spending outlook, but it would be premature to write off consumers,” said Bernard Jarosz, chief U.S. economist at Oxford Economics.
This week’s new data showed the inflation rate decreased slightly Although gas and food prices fell in July, they are still rising faster than before. iran war.
Consumer prices rise 3.4% in July The year-on-year rate was down slightly from 3.5% in June, the Labor Department said Wednesday. Before the Iran war, the inflation rate had fallen to 2.4%. On a monthly basis, prices rose by just 0.1% from June to July.
The modest decline was the second consecutive year of decline, after soaring gasoline prices pushed inflation to a three-year high of 4.2% in May.
Given the uncertain economic environment, economists are keeping a close eye on how families spend their time after Christmas.
As Americans become more careful with their money, shopping activity remains strong, albeit with more sales.
Elizabeth LaFontaine, director of research at Placer.ai, said off-price retailers, consumer electronics and office supplies retailers had a “strong early start” to the back-to-school season.
“Consumers are looking to take advantage of early deals to check out listings,” Lafontaine said.
Retailers like Walmart and Target are pushing discounts for the fall season to lure shoppers weary of inflation.
For example, Target says 95% of its school supplies prices are below last year’s levels.
Retailers will begin reporting quarterly results next week.
Stephen Yarov, CEO of outlet mall operator Tangier, said foot traffic has increased this summer due to World Cup festivities.
Yarov said more Americans are shopping as more people vacation closer to home to save money.
“We’re providing value, and customers are coming in and shopping more often,” Yarov told The Associated Press.
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Associated Press economic writer Christopher Lugaber contributed to this report from Washington.
