The latest retail sales figures from the U.S. Department of Commerce and National Retail Federation (NRF) paint a complex picture of consumer behavior in July, showing both resilience and emerging challenges in the retail sector.
Modest Growth Amid Economic Headwinds
Commerce Department data shows total retail sales reached $696.4 billion in July, a 0.7% month-over-month increase and 3.2% year-over-year growth. The three-month period from May to July saw 2.3% annual growth in retail sales.
NRF's adjusted figures, which exclude automobile dealers, gasoline stations and restaurants, indicate a stronger 1% monthly gain and 3.8% unadjusted annual increase. The three-month moving average through July showed 3.9% growth, with year-to-date figures up 4%.
"Retail sales growth has been slowing, but July got a mid-year boost from special promotions that multiple retailers offered," said NRF Chief Economist Jack Kleinhenz. "Households responded to those events, and sales growth accelerated noticeably."
E-Commerce Continues to Outperform
Non-store retailers, primarily e-commerce platforms, posted the strongest results with 10.3% year-over-year growth according to Commerce Department figures. NRF data showed online and other non-store sales up 1.9% seasonally adjusted from June and 11.8% unadjusted from July 2022.
This digital outperformance reflects lasting pandemic-era shifts in shopping behavior, continued platform innovation in areas like AI-powered recommendations and same-day delivery, and growing mobile commerce adoption.
Sector Performance Diverges
NRF's category breakdown reveals significant variation:
- Growth Leaders: Online sales (+11.8%), health/personal care (+8.3%), general merchandise (+1.6%), grocery (+1.5%), clothing (+0.9%)
- Declining Categories: Furniture (-7.6%), electronics (-3.5%), building materials (-3.5%), sporting goods (-0.5%)
This bifurcation suggests consumers are prioritizing essentials while pulling back on discretionary purchases amid persistent inflation.
Economic Crosscurrents
Kleinhenz noted that while consumer spending remains robust compared to 2022, "the pace is becoming slower as the economy slows in response to higher interest rates designed to reduce inflation."
Industrial real estate firm JLL observed additional positive factors, with retail traffic increasing 29.5% year-over-year at theaters and entertainment venues, likely boosted by blockbuster film releases. "Consumers continue showing resilience in apparel, restaurants and sporting goods despite high inflation," noted JLL Retail President Naveen Jaggi.
Strategic Implications
Retailers face several imperatives in this environment:
- Optimize inventory mixes toward essential categories
- Enhance digital capabilities and omnichannel experiences
- Develop targeted promotions to stimulate discretionary purchases
- Strengthen supply chain efficiency to preserve margins
The July data suggests consumer spending remains the primary engine of economic growth, though its momentum appears to be moderating under the weight of inflation, higher borrowing costs, and dwindling pandemic savings buffers.