The latest US retail sales data presents a mixed picture of consumer spending, as a key control group fell 0.4% in July, reversing June’s revised 0.5% increase, according to the Commerce Department. The decline is the largest monthly drop in the control group since February 2023 and points to cooling underlying demand.
The retail sales control group excludes volatile categories such as autos, gasoline, building materials and food services, and feeds directly into personal consumption expenditures and GDP estimates. Broader retail sales rose just 0.1% in July, supported by higher gasoline prices and auto sales, while nonstore retailers declined 0.3%, furniture stores fell 2.1%, and electronics stores dropped 1.8%.
Separately, the Census Bureau and National Retail Federation continue to tell different stories. The Census Bureau’s advanced monthly retail sales report showed a modest 0.1% increase, while the NRF’s calculation excluding volatile categories indicated a 0.4% gain. The NRF’s core retail sales rose 2.1% year-over-year, compared with a 1.8% annual increase in the Census figure.
The softening spending data arrives ahead of the Federal Reserve’s September meeting and could reinforce the case for an interest rate cut. Market participants are already pricing in a high probability of a 25-basis-point cut, according to CME FedWatch, although policymakers remain data-dependent.
For investors and businesses, the divergent data underscores the importance of methodology: the Census report is the official government measure used for GDP, while the NRF’s core figure is often preferred for a cleaner read on consumer demand. Overall, the July pullback suggests US consumers are becoming more selective, prioritizing essentials and rebuilding savings amid cooling hiring and a slight uptick in unemployment.
