Retail Sales Suffer Biggest Drop In More Than A Year As Iran War Casts Shadow Over Economy
Americans sharply pulled back on retail spending in July even as inflation remained elevated, raising fresh questions about whether the U.S. economy is weakening beneath the surface of the Iran war’s supply-driven price shock.
Retail sales fell 0.6% in July from the previous month, the Commerce Department reported Friday, marking the largest monthly decline since May 2025 and missing economists’ expectations for a modest increase. The Federal Reserve acknowledged that the conflict in the Middle East produced supply shocks, particularly in energy, contributing to elevated inflation.
The central bank simultaneously warned that household consumption had been growing only modestly.
For American households, the problem is more straightforward: they face higher prices while the economy shows signs of weakening demand. The result is less purchasing power and fewer opportunities to absorb another round of higher costs.
The headline figure is nominal, meaning it is not adjusted for inflation. Consumer prices increased another 0.1% in July, according to government data, meaning the underlying volume of goods purchased fell by more than the headline retail figure suggests. A rough adjustment for consumer-price growth would put the July decline in real terms at around 0.7%, though the precise figure depends on the deflator used for retail sales. (Read more from “Retail Sales Suffer Biggest Drop In More Than A Year As Iran War Casts Shadow Over Economy” HERE)
