Retail Sales See The Biggest Drop In More Than a Year. The Fading Effect Of Tax Refunds May Have Played a Role.

Retail sales declined unexpectedly in July, notching the biggest drop since May 2025, according to data from the Commerce Department.

However, the Census noted, the figure is up 5% from the same month last year. Total sales for the quarter were up more than 6% compared to the same period from 2025.

Excluding sales at gas stations and auto dealers, the figure dropped 0.2% as energy costs from the war in Iran remain high. The national average gas prices compiled by AAA stayed above $4 a gallon on Friday, and there are no perspectives of a swift end to the conflict. It is almost $1 than the average last year.

In this context, Vice President JD Vance said the Trump administration has a new primary goal in the war with Iran: keeping "oil and gas cheap for Americans all over our country."

Speaking to Fox News, he went on to say that "obviously goal number two is ensure that Iran never gets a nuclear weapon," but the remarks illustrate concerns caused by the economic impact of the continued closure of the Hormuz Strait.

The full impact of the energy disruption in the U.S. economy is still unclear and showing contrasting evidence. The latest economic data showed that the U.S. economy grew 1.5% in the second quarter, less than expected. But consumer spending remained resilient.

The indicator represents over two-thirds of the U.S. economic activity and bounced back in the second quarter, clocking in at 3.2% after slowing to 0.5% in the first quarter. As well as tax refunds, higher-income households boosted the figure.

Consumer sentiment also improved for the second month in a row in July. Concretely, the index from the University of Michigan showed a 12% increase from June, clocking in at 55.2, above the preliminary reading of 54.4.

Joanne Hsu, director of the University of Michigan's survey of consumers, noted in a statement that despite the gains, "sentiment is 11% below a year ago, reflecting a generally somber view of the economy amid five years of elevated inflation and persistent high prices."

"Consumers remain focused on pocketbook issues like purchasing power, while political or military developments remain more in the background," she added.