Retail sales unexpectedly fall in July as government tax refunds fade

America 250 Objects-Malls A display of a Bentley car at the Mall at Short Hills, in Short Hills, New Jersey, June 6, 2026, which has remained a premier luxury shopping destination for decades. (AP Photo/ Anne D'Innocenzio) (Anne D'Innocenzio/AP Photo/Anne D'Innocenzio)

By ANNE D'INNOCENZIO, Associated Press

NEW YORK — Shoppers unexpectedly cut their spending in July as a boost from government tax refunds faded.

Retail sales slipped 0.6% last month, the biggest drop since May 2025 from a revised gain of 0.2%, according to the Commerce Department data released Friday.

There was a notable bump in spending in both April and May as Americans dipped into their tax refunds.

Excluding sales at gas stations and at auto dealers, retail sales in July fell 0.2%. Gas prices ticked up again overnight to $4.08 per gallon on Friday, up from $3.85 a month ago, according to motor club AAA.

Shoppers pulled back in several areas like consumer electronics and online retailers

The data offers only a snapshot of consumer spending and doesn’t include activities like travel and hotel stays. The lone services category – restaurants – registered a 0.5% increase.