The American consumer retreated in June, dashing hopes for a more pronounced second-quarter upswing in spending and leaving companies less upbeat about the economy.

Retail sales unexpectedly declined 0.3 percent after a 1 percent May advance that was smaller than previously estimated, Commerce Department figures showed Tuesday in Washington. Small-business optimism last month suffered its biggest setback since November 2012, according to a report from the National Federation of Independent Business.

Sales fell at clothing stores, furniture outlets and auto dealers after gains the previous month, evidence of stop-and-go demand that’s keeping the economy from gaining steam. The data help explain the Federal Reserve’s monetary policy approach of waiting for a sustained pickup in growth before raising interest rates, which may happen as soon as September.

“It puts a little cold water on the idea that the consumer was gathering momentum,” said Stephen Stanley, chief economist at Stamford, Connecticut-based Amherst Pierpont Securities LLC, who projected June retail sales would be unchanged from the prior month. “I don’t think it fundamentally changes the picture” for the Fed.

Economists at JPMorgan Chase & Co., TD Securities LLC and Credit Suisse all marked down their tracking estimates for second-quarter growth by 0.2 percentage point after the retail sales data.

Even so, there was no immediate indication the report shifted economists’ expectations for the timing of a Fed rate increase either in September or December.

Yellen Testimony

Fed Chair Janet Yellen on Wednesday begins her semi-annual monetary policy testimony to lawmakers, who may ask about the outlook for demand and the approach to raising interest rates for the first time since 2006.

Another report Tuesday showed the NFIB’s index of small-business optimism fell by 4.2 points to 94.1 in June, the worst reading since March 2014. The smallest share of companies in a year expect the economy to improve, and the fewest since January 2014 plan to increase pay, according to results of 620 responses in the group’s survey. Stronger income gains are needed to provide a bigger lift to consumer spending, which accounts for almost 70 percent of the economy.

Eight of 13 major retail categories in the Commerce Department’s report showed declines in sales. An early Memorial Day holiday probably contributed to boosting sales in May at the expense of last month, indicating a more subdued performance for the quarter.

The median forecast of 82 economists surveyed by Bloomberg called for a 0.3 percent gain in June retail sales. May’s reading was revised down from an initially reported 1.2 percent increase.

Auto Sales

The report showed sales at automobile dealers dropped 1.1 percent after a 1.8 percent gain. While the decrease in June was in line with industry data released earlier this month, auto demand remains a bright spot.

Cars and light trucks sold at a 17.1 million annualized rate in June, down from a 17.7 million pace in May, figures from Ward’s Automotive Group showed. It capped the strongest quarter since 2005.

“We feel really good about the current environment,” Katharine Kenny, vice president of investor relations at Richmond, Virginia-based used-vehicle retailer CarMax Inc., said at a June 24 conference. “Consumers are, obviously, feeling good about buying a car, and that’s probably partially driven by the decrease and the continued low price of gas.”

Core Purchases

Retail sales excluding autos fell 0.1 percent after a 0.8 percent increase in May, the Commerce Department’s report showed. Core purchases, the figures that are used to calculate gross domestic product and which exclude such categories as autos, gasoline stations and building materials, declined 0.1 percent last month after increasing 0.7 percent in May. The median estimate in the Bloomberg survey called for a 0.3 percent gain.

Averaging May and June, retail sales climbed 0.15 percent excluding autos and gasoline. That matched the average gain over the first four months of the year, suggesting there is little momentum in spending.

Consumers instead have been pocketing the savings from lower fuel costs.

Even so, the job market has been a strong point. The unemployment rate dropped in June to 5.3 percent, the lowest since April 2008. Employers have added to payrolls at a steady pace in 2015. Hiring gains have averaged 208,330 a month this year after a 259,670 average in 2014 that was the best since 1999.

Another report Tuesday showed the cost of goods bought abroad dropped in June, restrained by automobiles. The import-price index declined 0.1 percent last month after advancing 1.2 percent in May, according to Labor Department figures.