July’s unexpected decline in retail sales signals a slowdown in consumer spending, reinforcing expectations of a Fed pause in September.
US retail sales fell 0.6% in July, marking the first decline in nine months, as tax refund boosts faded and Amazon’s Prime Day shift reduced July receipts. The drop, the largest in 14 months, defied economists’ forecasts of a 0.1% gain and followed a 0.2% rise in June.
The Commerce Department attributed the decline to lower gasoline prices and reduced spending at service stations. Year-over-year, retail sales rose 5.0%, but the monthly contraction suggests weaker consumer demand early in the third quarter.
Markets interpreted the data as dovish for Federal Reserve policy, with traders now pricing in a higher likelihood of no rate hike in September unless August inflation or jobs data surprises to the upside.