US retail sales post steepest drop since last year amid weak job data

US retail sales fell 0.6% in July, the first decline in nine months and the sharpest monthly drop since May 2025, according to the Commerce Department. The figures aren't adjusted for inflation, and falling gas prices last month accounted for part of the decline, but sales still fell even after accounting for that factor.

Major retailers moved membership and deal events, including a large online sales event, from July to June this year, pulling spending forward and leaving July sales lower by comparison.

The retail sales report follows other weak signals. Consumer sentiment fell about 8% in August, according to preliminary results from the University of Michigan's monthly survey released Thursday, with consumers citing concern that persistent inflation could erode their purchasing power. The US also unexpectedly lost 23,000 jobs last month, and the labor force participation rate has dropped to its lowest level in 50 years outside the pandemic. Annual inflation eased slightly in July but remained around 3.4%, still well above the Federal Reserve's 2% target.

If economic data continues along these lines, the Federal Reserve is likely to hold interest rates steady at its September meeting.

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