U.S. retail sales grew 0.5% on the month in July; momentum cooling

Investing.com - U.S. retail sales grew less than expected in July, suggesting slowing momentum in consumer spending activity ahead of next month’s crucial Federal Reserve meeting.

Retail sales rose by 0.5% last month, after growing by 0.9% in June, revised from previous 0.6% growth,according to Commerce Department data released earlier Friday. 

Economists had predicted that retail sales, which mostly reflect goods and are not adjusted for inflation, would grow by 0.6%.

Retail sales rose by 3.92% on an annual basis, with annual growth slowing from 4.35% in June. 

The retail sales figures can often be used as a gauge in the confidence the American consumer has in the wider economy, which may in turn influence how the Federal Reserve approaches potential interest rate reductions this year.

In separate releases, import costs rose by 0.4% month-on-month in July, more than the 0.1% expected, while export costs rose just 0.1%, cooling from 0.5% the prior month.

The Fed has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range since last July, citing uncertainty over inflation in the wake of the Trump administration’s imposition of tariffs on imports from most of the country’s trading partners.

This has annoyed President Donald Trump, who has repeatedly called for lower rates while criticising Federal Reserve Chair Jerome Powell’s cautious approach.

The weak jobs data at the start of the month, coupled with a benign consumer price report earlier in the week led the market to price in a rate cut in September, particularly after Treasury Secretary Scott Bessent suggested the Fed should consider a hefty 50 basis point interest rate cut.

A hotter-than-expected producer price release on Thursday dulled these expectations, and while a cut of 25 basis points is still widely expected, a larger cut has now been largely dismissed.