U.S. retail sales unexpectedly fell 0.6% in July, marking the first monthly decline in nine months and the steepest drop in more than a year, according to data released by the Commerce Department. Economists had expected a modest increase of 0.1%, making the decline a surprise for financial markets.
Analysts said consumer spending slowed after the boost from large tax refunds earlier this year faded. Retail sales were also affected by Amazon's decision to shift its Prime Day sales event from July to June, while lower gasoline prices reduced receipts at fuel stations. Sales at online retailers, automobile dealerships, and electronics stores recorded notable declines during the month.
The report has reinforced expectations that the U.S. Federal Reserve may keep interest rates unchanged at its September policy meeting. Together with recent softer inflation data and weaker employment figures, the latest retail sales numbers suggest that consumer demand is cooling at the start of the third quarter.
Despite the weaker monthly performance, economists noted that rising household wealth, supported by strong stock market gains, could continue to support consumer spending in the coming months. However, many expect economic growth to moderate during the third quarter.
