New Delhi, Aug. 14 -- WASHINGTON - Car dealerships in July felt it before the numbers arrived. Buyers who had spent months navigating interest rates that made monthly payments a central negotiation even at favorable sticker prices simply stayed away. Motor vehicle and parts dealer sales fell 1.8 percent for the month, the sharpest decline of any major retail category, and an early signal in a report that showed American consumers contracting across the board for the first time in nine months.

U.S. retail sales declined 0.6 percent in July from June on a seasonally adjusted basis, according to Census Bureau data released Thursday, snapping six straight months of expansion. Total sales reached $763.6 billion. The contraction was the steepe...