U.S. Retail Sales Rise 0.5% in July, Indicating Cooling Consumer Momentum
U.S. retail sales grew less than expected in July, signaling a slowdown in consumer spending ahead of next month’s key Federal Reserve meeting.
According to Commerce Department data released Friday, retail sales rose 0.5% in July, following an upwardly revised 0.9% increase in June. Economists had forecast a 0.6% gain. On an annual basis, sales grew 3.92%, down from 4.35% in June.
Retail sales excluding autos increased 0.3%, while sales excluding both autos and gas rose 0.2%. The “control group,” which excludes food services, auto dealers, building materials, and gas stations, still posted a 0.5% rise.
The broader retail sales figure is often viewed as a gauge of consumer confidence in the U.S. economy, influencing how the Fed approaches potential interest rate cuts this year.
Price Data and Fed Policy Outlook
Separate reports showed import prices rising 0.4% in July, above expectations of 0.1%, while export prices rose just 0.1%, down from 0.5% in June.
Analysts at Vital Knowledge noted the data offered mixed signals for the inflation outlook. While the headline sales number missed estimates, the shortfall was partly due to June’s upward revision. Import prices were also hotter on a month-to-month basis, with most tariffed categories—except autos—seeing increases.
The Fed has kept its benchmark interest rate at 5.25%-5.50% since July 2024, citing uncertainty over inflation following the Trump administration’s tariffs on imports. President Donald Trump has repeatedly called for rate cuts and criticized Fed Chair Jerome Powell for being too cautious.
Earlier this month, weak jobs data and a soft consumer price index report boosted market expectations for a September rate cut. Treasury Secretary Scott Bessent even suggested a 50-basis-point cut. However, a hotter-than-expected producer price index report on Thursday reduced those odds, leaving a 25-basis-point cut as the most likely outcome.
