US Retail Sales Plunge 0.6% in July, Cooling Inflation Fears

US retail sales unexpectedly fell by 0.6% in July, marking a significant decline from June's modest growth of 0.2%. The data shows that US consumers have become increasingly cautious at the start of the third quarter.

The weak retail sales are attributed to high interest rates, rising energy prices, and sluggish real income growth, which have squeezed household disposable spending on other goods.

US headline inflation remains above the Federal Reserve's 2% target, with a year-on-year rate of 3.4% in July. The cooling trend in consumption is also reflected in the recent labor market data.

The weak retail sales further reduce the need for another interest rate hike by the Fed in September, as policy makers weigh the risks of slowing demand and employment against inflation concerns.