American consumers pulled back on spending in July, a surprise slowdown after stronger sales in the first half of the year.
Retail sales last month fell 0.6 percent from June, the biggest drop in more than a year, according to data the Census Bureau released Friday. The unexpected decrease, which is not adjusted for inflation, came after a 0.2 percent rise in sales in June.
Gas stations, auto dealers and electronics stores were among the categories that saw sales declines in July. Shoppers also spent less at e-commerce shops, though economists attributed this to Amazon Prime Day, a major sales event for the online retailer, shifting to June this year.
American households have been struggling to cope with economic strains brought on by persistent inflation, including higher grocery bills and housing costs. That has left lower-income consumers strapped for cash, with many trimming their shopping lists at the supermarket and delaying big-ticket purchases like home renovations.
The U.S. economy has been resilient, despite the effects of the war in Iran, trade tariffs and other economic obstacles. But after a surge in job creation earlier this year, employers shed 23,000 jobs in July, and job gains were revised down by more than 100,000 for April and May. Inflation showed a slight easing of price pressures last month, although the cost of living remains elevated.
Economists said consumers may be in slightly better shape than the numbers implied. Bernard Yaros, the lead U.S. economist for Oxford Economics, said in a note that the labor market remains balanced and wealthy households continue to spend.
“Though the latest numbers warrant a downgrade to the spending forecast, it’d be premature to write off the consumer,” Mr. Yaros said.
But the disappointing retail sales may also be an early sign of a longer-term slowdown, with shoppers no longer enjoying the boost from robust tax refunds earlier this year, elevated energy prices and lingering concerns about income growth, Oliver Allen, a senior U.S. economics for Pantheon Economics, said in a note.
“It suggests a sharper slowdown in spending lies ahead,” he said.
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