Kiplinger Retail Outlook: Prime Day Masks Spending Trend

last updated 15 August 2025

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Total retail sales (excluding restaurants) rose a strong 0.7% in July, while core retail sales (which also exclude gas and autos) picked up by a moderate 0.3%. Motor vehicle sales continued their rebound from a severe drop in May, rising strongly in June and July. Auto dealers may still have pretariff inventory to sell. Clothing, sporting goods, furniture and e-commerce sales showed strength, while only building materials and electronics/appliance sales declined. Since the sales report is not inflation-adjusted, sales increases in tariff-affected categories are partly illusory. For example, the increase in furniture and home furnishings sales is only half as large as the official number after a rough adjustment for inflation.

The four-day Amazon Prime Day promotion in July likely boosted consumer spending. The underlying trend would have been weaker without the sale. This may signal that consumers are becoming more cost-conscious. Perhaps because of the Prime Day promo, in-store sales rose a modest 0.2%, but that came after a strong bump in June.

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Restaurant sales gave back most of their June increase, declining 0.4% in July. Spending on eating out is an important signal as to whether consumers feel flush or constrained. Spending on services excluding dining rose a moderate 0.3% in June, matching the average monthly increase so far in 2025. (June is the latest month for which services spending data other than dining are available. Data for other services in July will be published at the end of August.)

Price increases caused by tariffs are starting to show up among home furnishings and other imported goods in the Consumer Price Index, and a slowdown in some purchases may show up later. Price increases could become more prevalent, as inventories of goods that were stockpiled ahead of the tariffs start to run down and merchants begin passing on the cost of tariffs on goods they have imported recently.

Consumer sentiment ticked up in July but went back down again in early August. Uncertainties regarding the White House’s tariff policy and prospects for the overall economy appear to be putting a ceiling on further increases in sentiment. Spending will also be affected by flattening income growth later this year because of the slowdown in hiring taking place now.

Finally, even if the unemployment rate does not rise much, just the fear of job losses will likely boost the household savings rate from its current 4.5%. More saving means less spending on current consumption: a prudent move for individual consumers during times of uncertainty, but a headwind for the overall economy.

David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.