Retail sales grew in July, driven by surging auto purchases

Seasonally adjusted retail sales grew last month as auto purchases once again led the sector's gains. 

July U.S. retail and food service sales increased by 0.5% from June, totaling $726.3 billion, according to advanced estimates from the U.S. Census Bureau released Friday. That's nearly a 4% increase from July 2024.

The Bureau also revised June’s retail sales growth from 0.6% to 0.9%, updating the total to $722.6 billion. 

Economists polled by Reuters had expected July retail sales to grow by 0.5%, relatively keeping track with June’s previously reported data — before Friday’s revision. 

“Two weeks ago revisions were the big story with the Jobs Report (in a negative way) and today the revisions are again the bigger part of the story (in a positive way),” said Chris Zaccarelli, chief investment officer for Northlight Asset Management. “Prior month retail sales numbers were actually better than previously reported, which makes today’s headline numbers better than they appear (e.g. because they are still increasing on much higher previous numbers).”

Spurred by looming tariffs, auto purchases led the retail sector's sales growth in June and July, recovering from a lull in May. The increase is apparent in a recent Cox Automotive report, too, which found that July new-vehicle purchases had risen 6.6% year-over-year, thanks partly to surging fleet sales.

Sales at furniture and home stores, food and beverage stores, pharmacy and drug stores, gas stations, and clothing stores also rose last month compared to June. But sales at food and drink service establishments and electronic and appliance stores saw a drop in July from the previous month, the data showed. 

“Going forward, investors should monitor auto sales and other discretionary categories such as restaurant spending to gauge consumer health. Recession risks remain low, but I think it’s wise for the Fed to shift to a more neutral stance and cut rates in coming meetings,” said Jeffrey Roach, chief economist for LPL Financial. 

“As long as consumer spending holds up and companies are able to retain workers because of that robust spending, the flywheel can continue to spin, pushing corporate profits and stock prices higher,” Zaccarelli said. 

“The market is expensive, inflation has been increasing and unemployment has been rising, and yet consumers are still spending, the economy is still growing, and the market is still rising. These aren’t the perfect conditions for a robust rally, but right now they are good enough for a slow grind higher – with the occasional pullback – on a path to a higher stock market by year end,” he added. 

Behind the sales curtain, July’s wholesale inflation numbers rose sharply from the prior month, stunning analysts. The Producer Price Index rose 0.9% month-over-month, far exceeding forecasts of about 0.2%, marking the largest increase since early 2022.

—Shannon Carroll and Harriet Weber contributed to this article.