BofA forecasts July retail sales drop of 0.4% on Prime Day shift

Bank of America predicts a 0.4% decline in July retail sales, excluding automotive sales, due to Amazon's Prime Day being moved from July to June. The bank projects a 0.6% decline for the control group, which excludes autos, gas, building materials, and restaurants. Online retail sales dropped sharply after Prime Day and related promotions moved to June, with various retail categories experiencing monthly declines, including clothing, gas, and furniture.

Contributing factors to the July weakness include a heat wave around the Fourth of July weekend and the post-World Cup effect, ending on July 19. July's spending slowdown was widespread across categories. The bank noted that June retail sales were worse than forecast based on card data, potentially reducing the downside risk for the July Census Bureau report.

Bank of America emphasized that July's weakness was temporary, not a sustained trend, despite strong real consumer spending growth of 3.2% quarter-over-quarter in the second quarter GDP report. Low unemployment, stock markets at all-time highs, and falling gas prices supported consumer health. Lower-income households showed stronger spending growth in discretionary categories compared to higher-income households.