Retail sales post largest decline in 14 months

Sales at U.S. retailers this year have been brisk, especially because of how much wealthier Americans are spending.

Sales at U.S. retailers fell in July for the first time in 14 months, but not because the economy sputtered. Americans spent less at gas stations because of cheaper fuel and they bought less online after Amazon's summer sales bonanza.

Sales at retailers dropped 0.6% last month, the government said Thursday, defying Wall Street's forecast of a small increase. It was the largest decline since May 2025.

The trend in retail sales was stronger, however. Over the past year retail sales have risen 5%, somewhat above the long-term average.

Yet if inflation is factored in sales are not quite as rosy as they look. Everything costs more.

Retail sales represent a large slice of consumer spending, the main pillar of growth for the U.S. economy. The monthly figures are adjusted for seasonal swings in sales.

What these sales fail to capture, however, is what people spend on services such as travel, recreation and entertainment. Various spending trackers such as bank credit-card data show spending was strong in those areas last month.

Big picture: High inflation has put a hurt on Americans by raising the cost of living, but a low unemployment rate and low layoffs have given people the confidence to keep spending like they normally do.

Households could reduce spending temporarily to rebuild their savings after they drew down their bank accounts earlier in the year to cope with another burst of inflation. Consumer spending in the spring was unusually strong

Looking ahead: "There are few signs that consumer spending is wavering," said chief economist Richard Moody of Regions Financial, "even adjusting for the effects of higher prices."

Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX were set to open mixed in Friday trades.

-Jeffry Bartash