Retail Sales Are Strong Despite Headlines To The Contrary

Recent retail sales reports are misleading, as unadjusted monthly figures show a 0.9% rise, not a slump. Year-over-year sales are up 5.2%, outpacing inflation and last year's growth. Record-breaking back-to-school and college spending, projected at $146.3 billion, is expected to significantly boost tech and general merchandise sectors. Despite declining consumer sentiment over broader economic anxieties, personal spending remains robust. Consumers are prioritizing purchases, even with near-zero real wage growth and low savings rates, utilizing credit and flexible payment options. Experts predict strong retail performance through the holiday season, emphasizing consumer resilience and determination to maintain their quality of life.

Consumers keep confounding the economy’s doom merchants. A quick look at the actual numbers released by the Census Bureau belies the AP’s headline: “US Retail Sales Slump Unexpectedly and Sharply after a Summer Tax-Refund Boost Fades.” Or this one from the Wall Street Journal: “Weak Retail-Sales Number Adds to Softening Economic Data.”

GlobalData managing director Neil Saunders puts it plainly: “When it comes to the reporting of retail sales, never has so much uncertainty rested upon so much falsehood.”

Yes, as reported, month-over-month adjusted retail sales fell -0.6%, but the real numbers—consumers don’t spend in seasonally adjusted terms—rose 0.9%. That gain is even more remarkable since Amazon Prime Day and other related promotional events were held in June this year, not July as last year. In 2025, July month-over-month spending rose only 0.4%.

As if the month-over-month measures even matter. Year-over-year comparisons tell the real story. In July, total retail sales were up 5.2% from last year, climbing from $777.6 billion to $784.6 billion—or 4.9% excluding automobiles and gas stations. Higher gas prices elevated gas station sales by 16% for the month. And while many analysts exclude food services from the retail baseline, restaurant sales rose 5.9% in July, a powerful indicator of consumers’ discretionary spending.

Through the first seven months of 2026, retail sales are up 5.2% to $5.2 trillion. By comparison, at this point last year, sales grew 4.1% to $4.95 trillion. Inflation—3.4% today versus 2.7% a year ago—factors into the equation. But once inflation is removed in both periods, this year’s 1.8% real growth outpaces last year’s 1.4%.

With only five more months in the year to go, the National Retail Federation’s forecast for record-breaking back-to-school and college spending looks increasingly secure. Back-to-school is expected to deliver $43.3 billion to retail, up 11% over last year, while back-to-college is projected to reach $103.5 billion, a nearly 17% increase.

BTC will give a needed boost to home furnishings retailers—the only retail segment that is trailing 2025, down nearly 2%. Some 13% of BTC spending will go toward outfitting dorm rooms.

The largest share of both BTS and BTC spending will be tech-driven—34% and 27% respectively. Electronic stores, up 6.4% this year, and non-store retailers, up 10.2%, will benefit most, along with general merchandisers, running 3.3% ahead of last year.

Clothing and accessories retailers will also get a boost during the season. They are already up 5.8% year to date, and even department stores have begun to reverse years of declines with a modest 0.1% increase so far this year.

And when the kids aren’t hitting the books or computers, they’ve been spending on sporting goods and hobbies this year. Retail sales in that segment are up 10.4% year-to-date.

NRF vice president of consumer and industry insights Allison Zeller highlighted the importance of the season. “It’s regarded as the last major read we get on the consumer before we head into the winter holidays,” she shared. And while survey data shows consumers have pulled forward BTS and BTC purchases, she added, “There’s definitely more firepower left in the season.”

All told, if consumers spend as planned, BTS and BTC will add $146.3 billion to the retail economy, up from $128.2 billion last year—a striking 14% uptick. And Zeller also reported that consumer budgets for every major shopping event so far this year, except for graduations, are running ahead of 2025, including a 14% increase for both Mother’s and Father’s Day.

Even as retail sales remain remarkably strong, consumer sentiment fell 8% in August to 51 points on the University of Michigan’s 100-point baseline index. However, it noted that most of the decline reflects concern about overall business conditions with consumers’ views of their personal finances only slipping slightly.

Inflation worries weigh most heavily on the sentiment of older consumers, lower-income consumers, and those without a college degree—and could ultimately put a pause on higher-income consumer spending as well.

NRF chief economist Mark Mathews noted that throughout most of 2003 through 2005, wage growth outpaced inflation. But today, real wage growth is effectively at zero—even with inflation—due to rising prices, especially gasoline.

“This creates a bit of a situation where it’s hard for the consumer to continue spending more,” he said. “The key thing here is that inflation is going to play an important role in the consumer’s ability to keep on spending at the rate that we’ve seen in recent years.”

Mathews remains hopeful that inflation will soften as the year progresses, but added, “There’s little reason to believe that wage growth is going to rise much higher than current levels.”

He also warns that the current savings rate is nearing record lows at 3%—far below the long-term average of 8.4%—which could present challenges ahead. “The message here is that the consumer is actually choosing to spend rather than to save,” he shared.

“You can view that as a positive that consumers are comfortable enough that they can opt to keep spending and not save for a rainy day, but there is a bit of concern when consumers have to reach into savings or save less in order to spend,” he added.

He also observed that credit card balances and delinquencies are at near-record levels, though the transition to serious delinquencies has started to ease. Mathews concluded, “Access to credit is not a major issue.” And the new buy-now-pay-later options are giving consumers more flexible ways to keep shopping.

While Mathews didn’t get out over his skies on what the rest of the year might bring, GlobalData’s Saunders feels confident that retail will continue to perform strongly through the holiday season.

“The outlook for the remainder of the second half and the important holiday period looks solid,” he said. “Consumers are picky, choosy and finnicky—but they’re also determined and very reluctant to reduce their quality of living by curtailing spending on both the things they need, and the things they want.”

There’s no doubt that consumers are flashing mixed signals. “Americans feel relatively gloomy about the economy and are still broadly dissatisfied about the cost of living,” Saunder said, adding, “We also see an increasing attitude of throwing caution to the wind.”

Yet, a proper reading of the retail data shows anything but the “wall of gloom,” as Saunders put it, that recent coverage suggests. “The message of decline rests on looking at an incredibly bad interpretation of the numbers,” he asserted. “To dissect them properly, you at least need to start from the right numbers and that is made harder by the disruptive background noise.”

The latest Census Department report shows remarkable resilience among consumers, no matter how gloomy they feel. And they are far from distressed. “It will likely take a more general and wider economic shock—which cannot be discounted—to blow the consumer firmly off course,” Saunders concluded.

That shock has yet to materialize and, there is little indication it will in the months ahead.