US retail sales unexpectedly fall in July
Published Fri, Aug 14, 2026 · 09:21 PM
[WASHINGTON] US retail sales unexpectedly fell in July after recent strong gains that were fuelled by large tax refunds, but consumer spending is likely to remain supported by rising wealth from the stock market even as households are increasingly sensitive to higher prices.
Retail sales dropped 0.6 per cent last month after an unrevised 0.2 per cent gain in June, the Commerce Department’s Census Bureau said on Friday (Aug 14). Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, edging up 0.1 per cent. Estimates ranged from a 0.5 per cent drop to a 0.7 per cent increase.
Generous tax refunds this year helped to soften the blow from higher petrol prices stemming from the Middle East conflict, resulting in robust consumer spending in the second quarter. Those refunds have been exhausted, economists said.
Last month’s decline in retail sales was also payback after Amazon pulled forward its Prime Day event to June from July, with other retailers offering competing promotions. Petrol prices also fell last month, weighing on receipts at services stations. Auto manufacturers reported a decline in unit sales. With a stock market rally boosting household wealth, economists believed that the weakness in retail sales would be temporary. The S&P 500 index has risen 14 per cent this year.
Economists at PNC Financial said that an analysis of bank data showed households in July appeared more sensitive to rising petrol prices than they were earlier this year, creating what they said was a less-supportive backdrop for spending in the second half of the year. But they added that it was “difficult to envision a scenario where spending truly rolls over”, given the rise in household wealth.
“We see increasing evidence of upper-income and older households cashing in on wealth gains to support spending,” they wrote in a note. Retail sales excluding automobiles, petrol, building materials and food services fell 0.4 per cent last month after a downwardly revised 0.4 per cent increase in June.
Economists had forecast these so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, rising 0.3 per cent after a previously reported 0.5 per cent increase in June.
Consumer spending, which accounts for more than two-thirds of the economy, increased at a 3.2 per cent annualised rate in Q2. The economy grew at a 1.5 per cent pace last quarter. REUTERS
