U.S. retail sales unexpectedly flat in July

American shoppers were unexpectedly cautious last month, with retail sales unchanged from June, the U.S. Commerce Department reported Friday.

Analysts had expected that overall retail sales would rise 0.4 per cent.

• U.S. economy adds 255,000 jobs in July
• Federal Reserve chair Janet Yellen says uncertainties justify cautious approach

U.S. consumers spent less on clothing, sporting goods, appliances, and groceries. Sales at gas stations also fell because of lower pump prices. Excluding gasoline, sales rose 0.2 per cent month-over-month.

Shoppers spent 1.1 per cent more on autos in July — one of the few bright spots in the retail sales report.

Sales were up 2.3 per cent from a year earlier.

Retail sales in the April-to-June quarter rose by an annualized rate of 4.2 per cent, so July's figures represent a substantial cooling from that brisk pace and are raising questions about whether the moderation will be enough to hurt economic growth in the third quarter.

Consumer spending typically accounts for up to 70 per cent of GDP.

Earlier this week, the Atlanta Federal Reserve trimmed its estimate of U.S. GDP growth for the third quarter to an annualized 3.7 per cent, citing an unexpected increase in wholesale inventories.   

"While we don't expect retail spending to stall...the July report won't inspire much confidence in the economic momentum at this point," said TD senior economist Michael Dolega in a morning commentary.

"As such, the poor showing makes any likelihood of a [U.S.] rate hike this year all the more distant," he said. 

Jennifer Lee, senior economist at BMO, called it "a disappointing July, for sure" but said it wasn't too worrying. "If we didn't see steady job growth over the past few months, this would be a little more brow-raising," she said.