U.S. retail sales slide 0.6% in July, biggest monthly drop in more than a year
AI Market Summary
U.S. July retail sales fell 0.6% m/m, well below expectations, with declines persisting ex-gas and in core sales, signaling broad consumer demand weakness. With CPI still rising modestly, real consumption likely contracted, while consumer confidence and labor-market indicators also deteriorated. The mix of energy-driven inflation pressure and slowing demand raises policy uncertainty and is negative for U.S. risk assets in the near term.
Impact level
● High
Affected assets
NCSISP5002USD/USDT-0.22%
AI Insight · NCSISP5002USD/USDTAI Insight
▼ Bearish
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BlockBeats report: August 15 — Fresh data is pointing to a clear cooling in U.S. consumer spending. The U.S. Department of Commerce said retail sales fell 0.6% month over month in July, the steepest monthly decline since May 2025 and well below market forecasts that had called for a modest gain.
Excluding gasoline, retail sales also dropped 0.6%, suggesting the weakness is not simply an energy-price story. Core retail sales, a key gauge of underlying consumption, slipped 0.4% in July, missing expectations. Online sales fell 2.2%, and sales at auto and parts dealers declined, while restaurants and bars posted a 0.5% increase.
Because retail sales are reported in nominal terms, the July CPI increase of 0.1% implies real goods purchases may have fallen by roughly 0.7%.
Markets increasingly see the energy supply shock tied to the war in Iran as adding to U.S. economic strain. The Federal Reserve has previously noted that the Middle East conflict has pushed energy prices higher, lifting inflation, while household consumption growth has remained "very modest." Consumer sentiment deteriorated as well: University of Michigan preliminary data showed the August consumer confidence index falling to 51 from 55.2 in July, snapping a two-month improvement, with sharper drops among seniors, lower-income households, and people without a college degree.
Labor market signals also softened. The U.S. shed 23,000 jobs in July, the labor force participation rate slipped to 61.4%, and the unemployment rate held at 4.1% largely because some people left the labor force. Wage growth slowed to 3.2%.
Analysts warn that energy-driven inflation may be masking weakening fundamentals. Supply-side pressures are lifting prices as consumers curb spending amid eroding purchasing power, raising the risk of softer demand for businesses. With consumption representing roughly two-thirds of economic activity, the cooling trend could complicate the Fed's next policy decisions.
