Core retail sales fell 0.4% in July, and the Commerce Department released the numbers Friday after economists had expected a 0.3% rise. The report landed with a thud. It showed another month of ordinary people pulling back while the machinery of the economy keeps demanding more.
Retail sales overall fell 0.6% last month, the biggest decrease since May 2025, after June’s figure was revised upward to a gain of 0.2%. The decline followed spending bumps in April and May as Americans dipped into government tax refunds. That’s the setup: a brief burst of relief, then the usual squeeze returns.
Who Pays When the Numbers Fall
The drop raised concern among some economists about consumer resilience after a period in which shoppers helped drive the economy despite inflation and high gasoline prices. Bernard Yaros, lead U.S. economist at Oxford Economics, said, "Though the latest numbers warrant a downgrade to the spending forecast, it’d be premature to write off the consumer." He said the job market is "broadly balanced," and wealthy households, boosted by strong gains in the stock market, continue to spend.
That split matters. The people at the top keep spending because the stock market keeps feeding them. The people below get told the system is still "broadly balanced" while their budgets get chewed up by prices, fuel, and the slow grind of wage life.
Heather Long, chief economist at Navy Federal Credit Union, wrote, "American consumers are showing signs of fatigue," and added, "July retail sales were disappointing on all levels." The language is polite. The reality is blunt. People are tired.
What the Apparatus Calls Stability
The weak sales report followed unexpectedly sluggish jobs figures last week, and both suggested the economy could be slowing after strong consumer and business spending in the first half of the year. Separately, consumers turned more pessimistic about the economy this month, likely driven by stubbornly high prices, according to the University of Michigan's consumer sentiment index released Friday.
Prices in July were not adjusted for inflation and were affected by falling sales at gas stations. Business at gas stations fell 0.9% last month. Gas prices had remained low until later in the month when evidence of a stalemate between the U.S. and Iran in the Strait of Hormuz began to grow. Gas prices have been rising since the final week of July and ticked higher again overnight to $4.08 per gallon, up from $3.85 a month ago, according to AAA. That was 92 cents more per gallon than Americans were paying last year at this time. AAA said this week that the high cost of fuel for Americans this late in the year is unprecedented.
That’s the hierarchy in plain view. A geopolitical stalemate, a fuel market, and a price tag at the pump all land on ordinary people first.
Discounts, Deals, and the Pressure to Keep Buying
Excluding sales at gas stations and auto dealers, retail sales in July fell 0.2%. Business at motor vehicle and parts dealers fell 1.8% after a 1.9% increase in June, which had been helped by automakers' promotion incentives. Electronics and appliance sales declined 0.5%. Online sales fell 2.2% from June, when they were fueled by spending around Amazon's four-day Prime Day event that began in late June, earlier than previous years. The drop in online sales weighed heavily on the control group, which excludes food services, autos, building materials and gas station sales and is used to calculate economic growth; that figure fell 0.4% last month.
Among the bright spots, clothing and accessories stores, furniture and home furnishing stores, and building material and garden supplies merchants all posted gains. The report does not include travel and hotel stays, but restaurants, the lone services category, rose 0.5%.
Elizabeth Lafontaine, director of research at Placer.ai, said off-price retailers, consumer electronics and office supply retailers had a "strong early start" to the back-to-school season. "Consumers have looked to take advantage of early deals to check off their lists," Lafontaine said.
Walmart, Target and other retailers have been pushing discounts for the fall season. Target said 95% of prices for school supplies are at or below last year's levels.
Stephen Yalof, CEO of the outlet mall operator Tanger, said foot traffic increased this summer because of World Cup festivities and because more people were vacationing close to home to save money. "We’re rewarding with value, and we’re getting customers to come in … and shop more frequently," Yalof told The Associated Press.
That’s the language of managed scarcity dressed up as value. The stores cut prices, the bosses count traffic, and families try to stretch what’s left.
AP Economics Writer Christopher Rugaber contributed to this report from Washington.