US retail sales fell by 0.6% in July, marking the largest drop in over a year and surprising analysts who expected growth. This decline is attributed to consumers sharply cutting back on spending, particularly as the boost from government tax refunds faded. Factors such as cheaper gas prices and a slowdown in post-Amazon Prime sales contributed to this unexpected slump. As inflation continues to outpace wage growth, shoppers are feeling pressure ahead of the back-to-school season. The drop in retail sales has also resulted in a decline in the value of the US dollar, shifting market expectations regarding interest rate hikes.