U.S. retail sales grew at a slower pace in June as consumers cut back on spending, particularly on gasoline, according to new data released by the Commerce Department on Thursday. Retail sales increased by 0.2% from the previous month to $768.6 billion, a significant slowdown from the 1.0% increase recorded in May, though the figure matched economists’ expectations.

The biggest contributor to the slowdown was a 5.3% decline in sales at gasoline stations, reflecting lower fuel prices during much of the month. The drop came amid hopes that a ceasefire between the United States and Iran would ease tensions and stabilize energy markets. However, renewed hostilities have since pushed oil prices higher once again, raising concerns about future fuel costs.

Excluding motor vehicles and parts, retail sales fell by 0.2%, indicating that consumers also reduced spending in several other sectors. Sales declined at food and beverage stores, as well as health and personal care retailers, suggesting households are becoming more cautious with discretionary spending.

Despite the weaker figures, online retailers recorded strong gains. Economists attributed the increase to major promotional events, including Amazon Prime Day and competing discounts offered by Walmart, which encouraged consumers to shop online.

Analysts believe consumer spending remains relatively resilient but warn that underlying economic conditions could lead to further moderation. Michael Pearce of Oxford Economics noted that spending was expected to slow as consumers exhausted the extra savings gained from higher tax refunds earlier in the year. He added that while growth has held up so far, spending is likely to soften in the coming months.

Oliver Allen of Pantheon Macroeconomics also pointed to a weaker labor market and slower income growth as factors limiting consumer spending. He suggested that continued moderation in spending could strengthen the case for the Federal Reserve to hold off on further monetary policy tightening.

On an annual basis, retail sales remained strong, rising 6.7% compared with June last year. However, economists say the outlook remains uncertain as geopolitical tensions, fluctuating energy prices, and domestic economic conditions continue to influence consumer confidence and spending habits.