US retail sales rose modestly in July, the Commerce Department reported on Friday, as consumers grappling with tariff-driven price increases and weakening job growth pulled back on discretionary spending. The headline figure came in near economist expectations of roughly 0.3% month-on-month growth.

The release followed a run of data showing inflation holding near 3% and July payroll growth slipping below 100,000. Economists at Wells Fargo and Oxford Economics warned that tariffs on imported goods were beginning to erode household purchasing power, pushing shoppers toward value channels and discount retailers.

Spending patterns reflected continued caution, with strength concentrated in essentials and off-price categories rather than big-ticket discretionary items. Auto sales and electronics were expected to show softness, while grocery and non-store retail held up, according to forecasts from the National Retail Federation.

The data adds to the case some Federal Reserve officials have made for a rate cut at the September meeting, as consumer resilience shows early signs of fraying. Traders in federal funds futures had already priced in a high probability of easing, and a soft reading would reinforce those expectations.

A National Retail Federation spokesperson said households remained resilient but increasingly selective, prioritising necessities as tariff-related price pressures worked through supply chains and squeezed budgets across income brackets.