- Retail and food services sales declined by 0.6% month-over-month (m/m) in July, coming in below expectations for a 0.1% m/m gain. Sales were also lower on an inflation-adjusted basis, with volumes falling by 0.7%.
- Sales at gasoline stations were lower (-0.9% m/m) due to a drop in prices at the pump. Autos and parts dealers also took a breather in July (-1.8% m/m), following robust gains in prior months. Meanwhile, sales at building materials and garden retailers edged higher (+0.3% m/m).
- Control group sales, which exclude the volatile gasoline, auto, building material, and garden equipment categories, fell 0.4% m/m in July. Much of the weakness stemmed from a sharp decline in non-store retail sales (-2.2% m/m), reflecting lower sales at fuel dealers and the earlier timing of Amazon Prime Day, which took place in June this year rather than July. Electronics and appliance stores were the only other category to post a decline (-0.5% m/m).
- Across the remaining categories, spending proved relatively resilient, with sales either flat or modestly higher across most categories, led by clothing and accessories stores (+1.9% m/m), health and personal care stores (+0.7%), and miscellaneous retailers (+0.5% m/m).
- Spending at bars and restaurants—the only service category included in the report—rose by 0.5% in July and were up 5% from the year ago.
Key Implications
- Retail sales softened in July, with lower gasoline prices and weaker auto sales weighing on the headline. Temporary factors, including a decline in fuel dealer sales and a shift in the timing of Amazon Prime Day, have also played a role. Beneath this volatility, the underlying household demand held up despite a slower start to the third quarter. Meanwhile, July CPI data showed that inflation pressures continued to moderate, providing some relief to consumers through improved real purchasing power (commentary).
- The latest retail sales report suggests that consumer spending is transitioning from the weather- and tax-refund-driven rebound seen in Q2 to a more moderate pace of growth in Q3. Today’s release is still consistent with consumption advancing at roughly a 2% annualized pace this quarter, broadly in line with our forecast. 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.
 in July, coming in below expectations for a 0.1% m/m gain. Sales were also lower on an inflation-adjusted basis, with volumes falling by 0.7%. ){kind=link}