Analysts, who had been expecting an increase of only 0.3 per cent in July, said the result was a strong start to growth in the third quarter.
Consumer spending, which accounts for more than two-thirds of United States economic activity, increased at a 2.8 per cent annualised rate in the second quarter.
Shoppers turned out in force in July, driving retail sales to their largest gain since December 2016. Retail-control group sales, which are used to calculate GDP and exclude the categories of food services, auto dealers, building materials stores and gasoline stations, increased 0.6% following a 0.1% gain.
Helping to push the June level higher was a 1.2% increase in auto sales from the month before, its biggest increase since December.
The weaker dollar ensured USA retailers of overseas goods were not importing inflationary pressures, as the import price index rose at a monthly pace of 1.5% in July, the same as June's reading.
Auto dealerships and non-store retailers saw the biggest sales increases this year.
The May 2017 to June 2017 percent change was revised from down 0.2% to up 0.3%.
Building materials and supplies stores increased 1.2 percent over June and increased 8.5 percent unadjusted year-over-year.
Long-suffering department stores likewise showed signs of life, but cheap gasoline and falling sales of electronics and clothing still weighed on sales last month.
The saving rate has dropped to 3.8 per cent in the second quarter of this year from a rate of 6.2 per cent in the second quarter of 2015. Prices could decline further as a separate report from the Labor Department on Tuesday showed the cost of imported motor vehicles fell in July for the second consecutive month. The general trend of retail sales still remains worrying, despite the improvement over the last couple of months and 2% inflation still looks a pipe dream. There were sales gains in other areas, including furniture stores, hardware stores and restaurants.