U.S. retail sales declined 0.6% in August, the Commerce Department reported on Friday, undershooting market expectations and underscoring mounting pressure on consumer spending.
The decline, the largest since February, follows a revised 0.5% drop in July, indicating a sustained softening in demand. Core retail sales, which exclude volatile categories such as autos and gasoline, fell 0.3% last month, further eroding confidence in the durability of consumer resilience.
Economists had projected a modest 0.1% increase in overall retail sales and a 0.2% rise in the core measure. The unexpected weakness raises questions about the health of the U.S. consumer, a key pillar of economic growth, amid persistent inflation and elevated borrowing costs.
The data reinforces concerns that higher interest rates, now at a 22-year high, are weighing on discretionary spending. Retailers across sectors reported softer-than-expected foot traffic and online orders in recent weeks, with apparel and general merchandise stores among the hardest hit.
The Federal Reserve’s aggressive tightening cycle, designed to curb inflation, has increasingly drawn scrutiny over its impact on household budgets. Consumer prices remain elevated, though inflation has eased from last year’s peaks, keeping pressure on real disposable incomes.
Analysts warn that a prolonged decline in retail sales could signal broader economic weakness, potentially prompting the Fed to reassess its policy stance. The central bank’s next meeting is scheduled for September 19-20, where officials will weigh incoming data on growth, labor markets, and inflation.
The August retail sales report follows recent data showing a slowdown in hiring and a slight uptick in unemployment, adding to signs of a cooling economy. Policymakers and investors will closely monitor subsequent releases for confirmation of a trend that could influence future interest rate decisions.
