U.S. retail sales fell 0.6% in July, according to Census Bureau data released Friday, significantly underperforming the 0.1% growth expected by economists. The decline, the sharpest since May 2025, followed a modest 0.2% gain in June. Core figures also disappointed, with retail sales excluding automobiles dropping 0.3% against a projected 0.2% increase, while the control group—used to calculate GDP—fell 0.4%.
The broad pullback suggests cooling consumer demand as the impact of earlier tax refunds faded and higher energy costs weighed on household budgets. Market participants noted particular weakness following June's Amazon Prime Day boost.
Financial markets reacted immediately, with the U.S. Dollar Index (DXY) retreating toward 99.50 as Treasury yields softened. Investors interpreted the weak data as a signal for a potentially more accommodative Federal Reserve, increasing bets on interest rate cuts later this year.