Retail sales fell in July

August 14, 2026

Retail sales dropped 0.6% in July, the weakest pace in more than a year. Sales excluding autos fell 0.3%. Sales are not adjusted for inflation. Real retail sales fell 0.7% as the consumer price index (CPI) rebounded slightly from June, when inflation recorded its largest monthly drop since April 2020. On the year, retail sales remain up a solid, if not spectacular, 5%.

A majority of sectors reported higher sales. Clothing and accessory stores rebounded 1.9% in July after falling 0.4% in June. A key factor: GLP-1s prompting buying of smaller sizes. Accessory stores also performed well. 

Strain on low- and middle-income households led major retailers to cut prices on a broad swath of goods aimed at bringing in shoppers most affected by ongoing affordability concerns. Trading down is climbing the income ladder, now reaching those in upper-income households. Services spending is holding up, while big-ticket purchases lag. 

Health and personal care stores sales increased 0.7%. Miscellaneous retailers, including office supplies and novelty stores, saw sales climb 0.5%.

Restaurant and bar sales rose 0.5%, remaining positive even after adjusting for inflation. Curbs on immigration pose a challenge as 330,000 Haitians, concentrated in food preparation and the care economy, lost temporary protected status (TPS). Another 350,000 Venezuelans will lose TPS in October. Service sector and construction are most vulnerable to the loss of the workers covered by TPS. 

Building materials and garden equipment stores, furniture stores and general merchandise retailers each reported 0.3% gains.  Sporting goods, hobby and bookstores sales came in flat. 

Grocery store sales were steady in July but gained 0.8% from a year ago. Spending is down nearly 2% after adjusting for inflation on an annual basis. Cuts to SNAP funding and rising food and energy prices are challenging households. Most agricultural equipment and the trucks that move food to grocery stores run on diesel. Lower- and middle-income households are most affected as a larger share of their wallets goes to food.

Nonstore retailers fell 2.2%, the most since January 2025, as July sales were pulled forward into June by promotions at major online retailers. Some shoppers returned to in-person shopping as gasoline prices moved lower for the second straight month.  

Motor vehicle and parts dealers fell 1.8%, the worst performance since May 2025, following a solid 2.4% gain in June. Sales growth of 1.9% on the year was helped by relatively flat new vehicle prices and motor vehicle insurance falling 4.5%. Unit sales edged lower in July. Higher income households are currently the primary purchasers of new vehicles. Rising vehicle parts and maintenance costs in response to tariffs, increasing input costs and used cars needing more maintenance are keeping a lid on broader sales of new vehicles. We will likely see higher insurance premiums next year.

Sales at gasoline stations slipped 0.9% but moved up 2% after adjusting for the drop in prices at the pump. Price declines at the beginning of the month more than offset the rebound in prices in the remainder of July. 

Traffic through the Strait of Hormuz remains constrained as hostilities between the US and Iran have led to competing blockades. Drained inventory buffers could leave us vulnerable to price spikes even as demand weakens. Strategic petroleum reserves have reached levels not seen since the early 1980s. Refineries are running near full capacity, creating a floor under prices for gasoline, jet fuel, diesel and other refined products.

Sales of electronics and appliances dipped 0.5%. Chip shortages are driving electronics prices higher. If the strait remains closed, we will likely see more disruptions to inputs for chips like helium. The pullback is much larger after adjusting for the jump in computer and smart phone prices in July, which was large and stunning. 

Core retail sales, which exclude autos, gasoline, restaurants and building materials stores and feed directly into the GDP spending calculation, dropped 0.4% in July. That is the worst month since January 2025 but follows six strong months of core sales growth. That pace could not keep up forever. On the year, sales are up a sound 4.6%.