Americans pulled back on their retail spending in July and their confidence in the economy is taking a hit. That's a potentially troubling combination for a consumer-driven economy. Retail sales fell 0.6% in July from the prior month, the Commerce Department said Friday, down from June's 0.2% and marking the steepest drop since May 2025. Those figures are adjusted for seasonal swings but not inflation. A separate report from the University of Michigan showed that consumer sentiment declined about 8% early this month to a preliminary reading of 51, ending a two-month streak of rising sentiment.