July Retail Sales - Weaker than Anticipated

US retail sales sharply missed expectations in July.  This was the first decline in monthly retail sales since October 2025 and the lowest reading since May of last year.  In nominal terms retail spending was up 5.0% year-over-year but was down -0.6% month-over-month.  After adjusting for inflation, spending rose 1.6% year-over-year but fell -0.7% month-over-month.  Data continues to suggest K-shaped dynamics for the economy with wealthier Americans spending at faster rates while lower-income households face tighter budgets.  The average price of energy was down for the month; however, prices rose in the latter half of the month as the conflict in the middle east re-escalated.

• Real (inflation adjusted) retail sales rose 1.6% year-over-year.  In July, retail sales grew 5.0% nominally netting real growth of 1.6% after adjusting for 3.4% inflation.  Higher spending at gasoline stations (+16.2%) was a key driver with additional strength from brick-and-mortar retailers (+10.7%) and online retailers (+7.7%).  Nine of thirteen categories advanced in real terms.
• Real (inflation adjusted) retail sales fell -0.7% month-over-month.  In July, nominal retail sales levels fell -0.6% compared to June netting a decline in real growth of -0.7% after adjusting for 0.1% inflation.  Nominal growth was weighed down by reduced spending at online retailers (-2.2%) and gasoline stations (-0.9%).  Just seven of thirteen categories advanced in real terms.