Americans spent less in July as COVID-19 cases surged

Americans cut back on their spending last month as a surge in COVID-19 cases kept people away from stores.

Retail sales fell a seasonal adjusted 1.1% in July from the month before, the U.S. Commerce Department said Tuesday. It was a much larger drop than the 0.3% decline Wall Street analysts had expected.

The report offers the first solid glimpse of how the spread of the delta variant of COVID-19 may have changed the spending habits of Americans. At the end of July, the U.S. Centers for Disease Control and Prevention began recommending that even vaccinated people start wearing masks indoors in public places.

According to Tuesday’s report, spending fell at stores that sell clothing, furniture and sporting goods. At restaurant and bars, spending still rose nearly 2%, but the rate of growth has slowed from recent months before the delta variant spread and people were feeling safer about dining without their masks with others.

Economists think Americans are also shifting their spending from goods to services, things like haircuts or vacations, which are not included in Tuesday’s report. And rising prices for everything from food to washing machines might have checked spending.

Major retailers are releasing quarterly financial results this week, offering more insight into behavior during yet another uptick in infections. On Tuesday, Walmart raised its sales outlook for the year, a sign it expects Americans to keep on shopping at the same pace.

But the Commerce Department reported Tuesday that even online sales have begun to slow, falling 3.1% from the month before. Companies have reported a slowdown after astronomical growth last year as people stayed home and shopped more online during the pandemic.

Ebay, for example, said its number of active shoppers slipped 2%, to 159 million, in its latest quarter. UPS said it’s shipping fewer packages in the U.S. And Amazon, the world’s largest online retailer, said online sales grew 13% in its most recent quarter, the company’s smallest quarterly online sales growth in two years.