U.S. retail and food services sales fell 0.6 percent in July 2026 to $763.6 billion, the first monthly decline since October 2025 and the steepest drop since May of last year, according to advance estimates released August 14 by the U.S. Census Bureau. The decline reversed June’s 0.2 percent gain and came in well below consensus expectations for a 0.1 percent increase. But the headline number carries a significant asterisk: nonstore retailers, the category that captures e-commerce, fell 2.2 percent in July after a surge in June driven by Amazon’s decision to move its Prime Day event from July to June, pulling billions in online spending forward by a month. On a year-over-year basis, July retail sales were still up 5.0 percent, and the May-through-July period ran 6.3 percent above the same window in 2025, suggesting that the underlying spending trajectory remains positive even as the monthly data introduces volatility.
Key Takeaways
- July 2026 retail and food services sales totaled $763.6 billion, down 0.6% from June’s revised $768.1 billion, the first monthly decline since October 2025 and the steepest since May 2025, per the U.S. Census Bureau.
- The decline was driven primarily by a 2.2% drop in nonstore retail (e-commerce), largely attributed to Amazon moving its Prime Day event from July to June, which pulled forward online spending. Motor vehicle and parts dealers fell 1.8%, and gasoline stations declined 0.9%.
- Year-over-year, July retail sales were up 5.0%, and the three-month period from May through July ran 6.3% above the same window in 2025, maintaining the broader growth trajectory despite the monthly pullback.
- The CNBC/NRF Retail Monitor, which uses a different methodology that adjusts for seasonal shifts and excludes volatile categories, reported a 0.32% monthly gain for July, marking a tenth consecutive month of positive sales growth under that measure.
- Average hourly earnings rose 3.2% over the 12 months through July 2026, while July CPI came in at 0.1% month-over-month (3.4% year-over-year) and core CPI at 0.2% month-over-month (2.5% year-over-year), both in line with consensus.
- Weekly initial unemployment claims reached 209,000 in the week ended August 8, with the four-week average holding at 199,000, indicating limited layoffs and stable employment income supporting the spending base.
The July Decline Looks Worse in the Headline Than in the Underlying Data
The 0.6 percent monthly drop is a real number that reflects real spending behavior, but interpreting it requires understanding what drove it. The single largest contributor was the 2.2 percent decline in nonstore retailers, the Census Bureau category that captures online sales. Amazon moved its annual Prime Day event from its traditional July window to June in 2026. That shift pulled forward an estimated several billion dollars in online spending that would have normally landed in the July report, creating an artificial June spike and a corresponding July trough.
Motor vehicle and parts dealers fell 1.8 percent, reflecting a combination of elevated auto loan rates and tighter dealer inventory on certain model lines. Gasoline station receipts declined 0.9 percent as pump prices edged lower during parts of July before climbing back above $4 per gallon in August. Electronics and appliance stores fell 0.5 percent.
Against those declines, several categories posted gains. Clothing and accessories stores rose 1.9 percent, health and personal care stores increased 0.7 percent, building materials and garden supply dealers gained 0.3 percent, and furniture stores added 0.3 percent. The clothing gain is consistent with early back-to-school spending, a seasonal pattern that typically accelerates through July and August as parents equip students for the fall semester.
Excluding autos and gasoline, retail sales fell 0.2 percent. The control group, which strips out food services, auto dealers, building materials, and gasoline stations and feeds directly into the GDP calculation, declined 0.4 percent, the weakest reading since early 2025. That control group number is the figure that will draw attention from economists modeling third-quarter GDP, because it suggests that the consumer contribution to economic growth may moderate from the pace set in the first half of the year.
Two Different Retail Measures Tell Two Different Stories About July
The Census Bureau’s Advance Retail Sales Report and the CNBC/NRF Retail Monitor both measure consumer spending, but they use different methodologies and produce different results. The Census Bureau’s headline figure is a seasonally adjusted estimate based on a sample survey of retail and food services firms, covering total receipts without adjusting for price changes. The CNBC/NRF Retail Monitor, developed by the National Retail Federation in partnership with CNBC using Affinity Solutions credit and debit card transaction data, applies its own seasonal adjustments and excludes categories that the NRF considers non-retail.
For July 2026, the Census Bureau reported a 0.6 percent decline. The CNBC/NRF Retail Monitor reported a 0.32 percent gain, marking what it described as a tenth consecutive month of positive sales growth. The divergence does not mean one measure is wrong. The NRF’s methodology is designed to capture underlying retail trends by smoothing out the kind of one-time calendar shifts, like the Prime Day move, that amplify volatility in the Census headline number. The Census report, by contrast, measures what actually happened at the register in a given month without adjusting for why spending shifted between periods.
For small business owners and retail operators, both numbers carry information. The Census figure reflects the cash-register reality that retailers experienced in July: receipts were lower than June. The NRF figure reflects the underlying trend that, after adjusting for distortions, consumer spending continues to move forward. The practical takeaway is that July was not a month where consumers stopped spending. It was a month where the timing of promotional events redistributed spending across the calendar in a way that made one month look weaker and the prior month look stronger than the actual trend warranted.
Wage Growth Continues to Outpace Core Inflation, Supporting the Spending Base
Average hourly earnings rose 3.2 percent over the 12 months through July 2026, according to the Bureau of Labor Statistics. Core CPI, which excludes food and energy, rose 2.5 percent year-over-year in July. The gap between wage growth and core inflation means that the average worker’s purchasing power is expanding in real terms, even though headline inflation at 3.4 percent year-over-year remains above the Federal Reserve’s 2 percent target and above the core rate that excludes the volatile food and energy categories consumers feel most acutely.
Headline CPI increased 0.1 percent month-over-month in July, following a 0.4 percent decline in June that briefly raised hopes of a disinflationary trend. The July reading was in line with consensus expectations. Core CPI rose 0.2 percent month-over-month after being flat in June, also matching expectations. The Producer Price Index held steady in July following a 0.1 percent decrease in June, coming in below the consensus estimate of a 0.2 percent increase. The combination of stable wholesale prices and modest consumer price increases suggests that upstream cost pressures are not currently building, though energy prices remain a wildcard as gasoline held above $4 per gallon throughout August.
The labor market continues to provide the structural support beneath consumer spending. Weekly initial unemployment claims reached 209,000 in the week ended August 8, up 9,000 from the prior week’s revised level, while the four-week average held at 199,000. Low claims mean that job losses are not rising fast enough to erode the aggregate income base that fuels consumer spending. As long as workers are employed and their wages are growing faster than core prices, the spending floor holds, even if the pace of growth moderates and the composition of spending shifts toward promotional and value-driven purchasing.
The Housing Market Is Slowing but Not Collapsing Under Rate Pressure
Existing home sales fell 1.7 percent month-over-month in July to 4.06 million units at a seasonally adjusted annual rate, the lowest level in three months, per the National Association of Realtors. Year-over-year, existing sales were up 0.7 percent. The nationwide median existing home sales price declined 2.0 percent month-over-month on a non-seasonally-adjusted basis to $434,100 but remained 2.0 percent above its year-ago level.
The housing data reflects the tension between persistent demand and the affordability constraint imposed by elevated mortgage rates. The 30-year Treasury yield hit 5.30 percent in mid-August, its highest level since before the 2008 financial crisis, and mortgage rates have tracked that move. With Fed Chair Warsh signaling openness to a rate hike at the September 16 FOMC meeting, the near-term trajectory for borrowing costs points sideways to higher rather than lower, which will continue to suppress transaction volumes in the existing home market.
For small business owners in real estate services, home improvement, and adjacent industries, the housing data describes a market where transactions are happening but at a reduced pace. The year-over-year gain in median prices suggests that sellers are not capitulating, and the relatively low inventory that has characterized the post-pandemic housing market continues to support prices even as sales volumes soften. Businesses that depend on housing turnover, including moving companies, home staging services, mortgage brokers, and renovation contractors, should plan for volume levels that remain below the historical norm until borrowing costs decline meaningfully.
What the Consumer Data Means for Small Business Operators Heading Into Fall
The aggregate consumer data from June through August 2026 paints a picture of a spending base that is intact but operating under increasing strain. Consumers are still spending, but they are spending selectively, responding to promotions, pulling forward purchases when deals are available, and pulling back when they are not. The gap between the Census Bureau’s July decline and the NRF’s July gain illustrates this dynamic: spending did not disappear in July; it shifted to June when the promotional incentives were stronger.
For retailers, food service operators, and e-commerce businesses, the implication is that promotional calendars are now as important as inventory management. Consumers in a 3.4 percent inflation environment with 4.0 percent year-ahead inflation expectations and only 8 percent expecting real income gains are not making spontaneous purchases at full price at the same rate they did when inflation was lower and confidence was higher. They are waiting for the deal, buying during the event, and sitting out the weeks between promotions.
The University of Michigan’s August consumer sentiment reading of 51.7, down 6.3 percent from July and approximately 11 percent below its year-ago level, reinforces the caution in the spending data. Consumers expect business conditions to worsen over the next year and the next five years, and they expect inflation to remain elevated even as the monthly CPI readings show some moderation. That expectations gap, where consumers feel worse about the economy than the data strictly warrants, tends to express itself in delayed discretionary purchases, increased price sensitivity, and a preference for value over convenience.
The back-to-school season, which traditionally anchors late-July through mid-September retail activity, is already underway and providing a floor for spending in clothing, electronics, and general merchandise. The National Retail Federation’s 2026 back-to-school spending survey projected that households with school-age children would spend an average of $890 on clothing, supplies, electronics, and related items, up from $874 in 2025. That seasonal tailwind will carry retail numbers through September, but the question for the fourth quarter is whether consumers maintain spending momentum heading into the holiday season or whether the combination of elevated rates, persistent inflation anxiety, and a potentially weaker labor market creates a more cautious holiday spending environment than 2025.
FAQs
Did U.S. retail sales increase or decrease in July 2026?
The U.S. Census Bureau reported a 0.6% decline in July retail and food services sales to $763.6 billion, the first monthly drop since October 2025. However, the CNBC/NRF Retail Monitor, which uses a different methodology, reported a 0.32% gain for July, marking a tenth consecutive month of positive growth under that measure. The divergence is largely explained by Amazon’s Prime Day event shifting from July to June, which pulled forward online spending.
Are consumers still spending despite high inflation?
Year-over-year retail sales were up 5.0% in July and 6.3% for the three-month period from May through July compared to the same window in 2025. Wage growth of 3.2% continues to outpace core inflation of 2.5%, supporting real purchasing power. However, consumers are increasingly selective and promotion-driven in their spending behavior.
What does the July retail data mean for the economy?
The control group of retail sales, which feeds directly into GDP calculations, fell 0.4% in July, the weakest reading since early 2025. This suggests the consumer contribution to third-quarter GDP growth may moderate from the first half’s pace. The next retail sales report, covering August, is scheduled for release on September 16.
How is the housing market affecting consumer spending?
Existing home sales fell 1.7% month-over-month in July to 4.06 million units at an annual rate, with mortgage rates tracking the 30-year Treasury yield’s rise to 5.30%. Reduced housing turnover constrains spending in real estate services, home improvement, and adjacent industries, though stable median prices ($434,100, up 2.0% year-over-year) indicate sellers are not capitulating.
