WASHINGTON – US retail sales unexpectedly fell in July after recent strong gains that were fuelled by large tax refunds, but consumer spending is likely to remain supported by rising wealth from the stock market even as households are increasingly sensitive to higher prices.
Retail sales dropped 0.6 per cent in July after an unrevised 0.2 per cent gain in June, the Commerce Department’s Census Bureau said on Aug 14.
Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, edging up 0.1 per cent. Estimates ranged from a 0.5 per cent drop to a 0.7 per cent increase.
Generous tax refunds in 2026 helped to soften the blow from higher petrol prices stemming from the Middle East conflict, resulting in robust consumer spending in the second quarter. Those refunds have been exhausted, economists said.
July’s decline in retail sales was also payback after Amazon pulled forward its Prime Day event to June from July, with other retailers offering competing promotions.
Petrol prices also fell in July, weighing on receipts at services stations. Auto manufacturers reported a decline in unit sales.
With a stock market rally boosting household wealth, economists believed that the weakness in retail sales would be temporary. The S&P 500 index has risen 14 per cent in 2026.
Economists at PNC Financial said an analysis of bank data showed households in July appeared more sensitive to rising petrol prices than they were earlier in 2026, creating what they said was a less supportive backdrop for spending in the second half of the year.
But they said it was “difficult to envision a scenario where spending truly rolls over,” given the rise in household wealth.
“We see increasing evidence of upper-income and older households cashing in on wealth gains to support spending,” they wrote in a note.
Retail sales excluding automobiles, petrol, building materials and food services fell 0.4 per cent in July after a downwardly revised 0.4 per cent increase in June. Economists had forecast these so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, rising 0.3 per cent after a previously reported 0.5 per cent increase in June.
Consumer spending, which accounts for more than two-thirds of the economy, increased at a 3.2 per cent annualised rate in the second quarter. The economy grew at a 1.5 per cent pace last quarter. REUTERS
Source : https://www.straitstimes.com/business/us-retail-sales-unexpectedly-fall-in-july
