US retail sales fell by 0.6 percent in July, reaching $763.6 billion, marking the weakest performance in over a year, according to the Department of Commerce. The decline was attributed to reduced spending at gasoline stations, online shops, and grocery stores. Additionally, a consumer sentiment survey conducted by the University of Michigan indicated an approximately eight percent drop in consumer confidence for August, following two months of gains.
The decrease in retail sales comes in the context of rising inflation, which has been exacerbated by the ongoing conflict involving the United States and Israel against Iran, which began on February 28. This conflict has led to increased energy prices and has affected American households already facing high costs. Inflation expectations for the coming year rose slightly from 4.2 percent in July to 4.3 percent in August, according to the survey.
Analysts had predicted a 0.1 percent increase in retail sales for July. Excluding auto dealers and gasoline stations, sales decreased by 0.2 percent month-over-month. Heather Long, chief economist at Navy Federal Credit Union, noted that consumers are exhibiting signs of fatigue, with disappointing retail sales across various categories. Sales at motor vehicle and parts dealers fell by 1.8 percent, and online sales decreased by 2.2 percent. Despite the decline, retail sales were still up five percent compared to the same period last year.
Economist Oliver Allen from Pantheon Macroeconomics warned of a potential sharper slowdown in consumer spending due to the absence of tax refund boosts, ongoing high energy prices, weak income growth trends, and limited scope for further declines in the personal saving rate.