U.S. Retail Sales Rise 0.5% in July Amid Tariff Impact and Economic Uncertainty

Retail sales in the United States rose 0.5% in July, according to a report released by the U.S. Commerce Department on August 16 [1]. The increase, while a slowdown from the revised 0.9% growth in June, reflects resilience in consumer spending amid the ongoing impact of tariffs imposed by President Donald Trump on imported goods. The figure matched economists' expectations and marked a return to growth after two consecutive months of declines—0.1% in April and 0.9% in May [1].

Automotive sales, which had been highly volatile due to the 25% tariff on imported cars and parts, rebounded in July with a 1.6% rise, indicating a return to more stable consumer behavior. Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, noted that the uptick followed a surge in March and April, as shoppers rushed to purchase cars before the tariffs took effect [1]. The latest figures suggest that the market has largely normalized.

Outside the automotive sector, spending remained robust across a variety of retail categories. Clothing store sales climbed 0.7%, online retailers recorded a 0.8% increase, and home furnishings and furniture stores saw a 1.4% rise in business [1]. However, not all sectors performed well. Electronics store sales fell 0.6%, and restaurant sales declined 0.4% as consumers appear to be shifting toward dining at home to cut costs [1].

The continued strength in retail spending is notable given the broader economic headwinds. The U.S. Labor Department reported that job creation slowed sharply in July, with only 73,000 jobs added—well below the 115,000 expected [1]. This slowdown has been attributed in part to Trump’s trade policies, which have led to uncertainty and hesitation among businesses.

Inflation also remains a concern. While overall consumer prices increased 2.7% year-over-year in July, unchanged from the previous month, core prices—excluding food and energy—rose 3.1%, slightly above the Federal Reserve’s 2% target [1]. On a monthly basis, prices rose 0.2%, down from 0.3% in June. The data showed that lower gas prices and slower rent increases partially offset some of the inflationary pressure from tariffs.

Producer price data further signaled potential cost pressures ahead. The Labor Department reported that the producer price index—a measure of wholesale inflation—surged 0.9% in July, the largest jump in over three years [1]. Annual wholesale inflation stood at 3.3%, significantly higher than forecasts. These figures suggest that businesses are absorbing some of the cost of tariffs, but with rising wholesale prices, these costs may be passed on to consumers in the near future.

Meanwhile, major retailers are bracing for the financial impact of these trade policies. Walmart, the largest U.S. retailer, has already raised prices on certain imported goods, such as bananas and car seats [1]. Other companies, including Procter & Gamble, e.l.f. Cosmetics, and Black & Decker, have announced or implemented price hikes to offset higher production costs.

Warby Parker, the eyewear retailer, has adopted a selective approach to price adjustments. The company is focusing on premium products and shifting production away from China to reduce exposure to tariffs [1]. Warby Parker’s CEO, Neil Blumenthal, highlighted that strategic price increases have supported the company’s growth, particularly in high-margin offerings like progressive lenses.

With major retailers set to report second-quarter earnings next week, analysts will be closely watching how much of the increased cost burden is being absorbed by companies versus passed on to consumers. These reports will also provide insight into consumer behavior as the key fall and holiday shopping seasons approach [1].

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[1] title: The mighty American consumer keeps shrugging off tariffs as retail sales rise 0.5% in July

url: https://fortune.com/2025/08/15/retail-sales-july-consumer-spending-tariffs/