Retail sales in the US unexpectedly decreased last month, registering the largest monthly drop in more than a year, amid declines in spending on motor vehicles and at gas stations.
Sales fell 0.6% in July following a 0.2% gain the month before, the Census Bureau reported Friday. The consensus was for sales to rise by 0.1% last month, according to a survey compiled by Bloomberg.
The print marked the biggest drop since May 2025, which showed a 1.1% decline.
Outlays on motor vehicles and parts dealers fell 1.8% after a 2.4% gain in June. Gasoline station receipts retreated 0.9% in July following a 5.8% drop the prior month.
"American consumers took a breather last month, despite the tailwind from rising equity markets," BMO Capital Markets Senior Economist Sal Guatieri said in a separate note. "This, together with a weaker jobs report and subdued core (consumer price index) inflation, raise the odds of the (Federal Open Market Committee) staying patient again in September."
Earlier in the week, government data showed that annual consumer inflation slowed to a four-month low in July. Last week, the Bureau of Labor Statistics reported that employment in the world's largest economy unexpectedly fell last month amid a marked decline in government payrolls.
The probability of the Federal Reserve keeping its benchmark lending rate unchanged in September rose to 71% on Friday from 66% the day before, according to the CME FedWatch tool. The odds that the central bank will hike interest rates by 25 basis points fell to 29% from 34%.
"While households continue to face headwinds from elevated gasoline prices and an uptick in mortgage rates, easing inflation pressures, continued household wealth gains, and a steady labor market should help sustain spending in the months ahead," TD Economics Economist Ksenia Bushmeneva said.
Retail sales without the motor vehicle and gas components turned negative at 0.2% month over month, compared with the Street's view for growth of 0.3%.
Spending on furniture and clothing rebounded on a monthly basis in July, while outlays on electronics and appliances swung into negative territory.
