Shoppers in the U.S. cut back their purchases in July even more than expected as concerns over the delta variant of Covid-19 dampened activity and government stimulus dried up.
Retail sales for the month fell 1.1%, worse than the Dow Jones estimate of a 0.3% decline and below the upwardly revised 0.7% increase in June.
Excluding automobiles, sales declined 0.4%, according to Commerce Department figures released Tuesday.
Markets showed little initial reaction to the news, with futures tied to the Dow Jones Industrial Average off more than 200 points and government bond yields lower across the board.
“Although retail sales fell in July, the outlook for consumer spending remains positive,” said Gus Faucher, chief U.S. economist at PNC. “However, spending growth will shift from goods to services over the next couple of years, limiting growth in most categories of retail sales.”
Consumers make up nearly 70% of all activity in the U.S., so retail sales are watched closely as a gauge to overall economic health.
Powered by a series of government stimulus checks, shoppers helped lift the economy out of the shortest recession in history, lasting just two months from the initial coronavirus fears in February 2020 until April, a month after fiscal and monetary authorities unleased a series of unprecedented programs to get the nation through the pandemic.