United States retail sales fell in July for the first time in nine months as the boost from earlier tax refunds faded, signalling a slowdown in consumer spending.
Retail sales declined 0.6% in July, according to the Commerce Department's Census Bureau, following an unrevised 0.2% increase in June.
The drop was the first monthly decline since October and the largest in 14 months.
Economists had expected retail sales, which largely measure goods purchases and are not adjusted for inflation, to edge up 0.1%.
Despite the monthly weakness, retail sales were still 5.0% higher than a year earlier.
With the consumer price index (CPI) rising 0.1% in July, economists said the decline in sales largely reflected a reduction in purchasing volumes.
Although inflation eased during the month, prices remained significantly higher than a year ago, leaving consumers increasingly sensitive to rising living costs.
The weakness was broad-based. Sales at nonstore retailers fell 2.2%, while receipts at motor vehicle and parts dealers dropped 1.8%. Electronics and appliance store sales declined 0.5%, while service station receipts fell 0.9%, reflecting lower fuel prices.
Average U.S. petrol prices are currently hovering just above US$4 a gallon, down from around $4.39 early in the U.S.-Israeli conflict with Iran.
Before the conflict began in February, petrol prices averaged $2.98 a gallon. Elevated fuel costs have contributed to a broader cost-of-living squeeze that has weighed on consumer confidence.
There were, however, pockets of resilience. Clothing store sales rebounded 1.9%, likely supported by back-to-school shopping demand.
Sales at food services and drinking places, the only services category included in the report, rose 0.5% after increasing 0.4% in June. The category is widely viewed as a key indicator of household financial health.
Other gains were recorded at furniture stores, building material and garden supply outlets, miscellaneous retailers, and health and personal care stores. Sales at sporting goods, hobby, musical instrument and book retailers were unchanged.
Core retail sales, which exclude automobiles, petrol, building materials and food services, fell 0.4% in July after a slightly downwardly revised 0.4% increase in June.
Economists had expected core retail sales, which most closely align with the consumer spending component of gross domestic product, to rise 0.3% following the previously reported 0.5% increase in June.
The report follows unexpected job losses in July and relatively subdued inflation readings, reinforcing market expectations that the Federal Reserve will leave interest rates unchanged at its September meeting unless August inflation or employment data surprises to the upside.
According to the CME Group FedWatch Tool, financial markets were pricing in a 66.9% probability that the Fed would maintain its benchmark interest rate in the 3.50%-3.75% range at its September meeting.
