US retail sales and sentiment weaken

U.S. retail sales fell 0.6% in July compared with June, marking the steepest monthly decline since May 2025. The pullback signals a clear softening in consumer demand after a small gain in the prior month, and represents the largest setback for retailers in more than a year.

The decline was wider than many analysts had anticipated and cut across several major categories. The figures indicate that consumers are becoming more cautious in their discretionary purchases, even as overall price pressures have eased from earlier peaks.

Online spending was among the weakest areas, with e‑commerce sales down 2.2% month over month in July. That reversal followed earlier strength in digital shopping and points to a notable shift in consumer behavior over the summer.

Sales at gasoline stations also declined in July, alongside lower receipts at auto dealers and electronics stores. The weakness in autos and electronics suggests households are showing more restraint on big‑ticket and durable goods purchases.

One notable exception to the overall downturn was in food services. Spending at restaurants and bars rose about 0.5% in July, indicating that consumers continued to allocate money toward dining out even as they cut back in other areas.

Alongside the weaker July spending data, survey evidence points to a deterioration in household confidence. The University of Michigan’s preliminary consumer sentiment index fell to 51 in August from a final reading of 55.2 in July, a decline of roughly 8%.

The August reading marked the first monthly drop in sentiment in three months and came in below economists’ median expectations. Respondents expressed greater concern about business conditions and inflation, contributing to the lower overall index level.

The sentiment survey showed that the decline was not evenly distributed across the population. Larger month‑to‑month drops were recorded among older consumers, lower‑income households and respondents without a college degree.

These groups tend to be more sensitive to changes in prices and labor market conditions, so their sharper pullback in confidence may help explain some of the broad-based weakness seen in July retail sales. The combination of softer spending and falling sentiment highlights growing caution among many U.S. households as the summer progresses.