US consumers might be spent

If consumers are the lifeblood of the US economy, their type right now is B negative. US retail sales fell far short of expectations last month, sliding 0.6%—their first drop in nine months and the biggest since May 2025.

The Commerce Department’s retail sales report isn’t adjusted for inflation, so when gas prices fall (as they did last month), so do overall sales numbers. But that’s not enough to explain away the dip, because even with that taken into account, sales still decreased in July.

Amazon may be to blame

The online shopping giant moved its massive Prime Day sales event from July to June this year. Walmart+ and Target Circle also held membership deal events in June. So, per the Wall Street Journal:

• Sales at nonstore retailers (mostly online stores) jumped 7.7% in June.
• In July, that number decreased by 2.2%.

Basically, consumers shopped ’til they dropped in June, then stayed on the floor in July, especially once all of the World Cup festivities ended.

It’s still an economic warning sign

And there are others: Consumer sentiment slid about 8% this month, according to preliminary results of the University of Michigan’s monthly consumer survey. The survey results, released yesterday, show consumers are worried that high inflation could continue to eat into their purchasing power.

Plus, the US unexpectedly lost 23,000 jobs last month and, outside of the pandemic, the labor participation rate is at its lowest level in 50 years. Plus, while inflation declined last month, the annual rate was still hovering around 3.4%—well above the Fed’s 2% target.

Warsh is watching: If the economic data continues to look like this in the coming weeks, Kevin Warsh and the rest of the Federal Reserve will likely keep interest rates steady at their next meeting in September.—BC