WASHINGTONΒ – Retail sales fell sharply in May as consumers pulled back from a spending surge early this year to get ahead of President Donald Trumpβs sweeping tariffs on nearly all imports.
Sales at retail stores and restaurants dropped 0.9% in May, the Commerce DepartmentΒ said Tuesday, after a decline of 0.1% in April. The figure was pulled down by a steep drop in auto sales, after Americans ramped up their car-buying in March to get ahead of Trumpβs 25% duty on imported cars and car parts. Excluding autos, sales fell 0.3%.
The sales drop is hitting after sharp declines inΒ consumer confidence this year. Still, inflation has cooled steadily and unemployment remains low, which could fuel steady spending in the coming months, as the economy has remained mostly solid.
A category of sales that excludes volatile sectors such as gas, cars, and restaurants rose last month by 0.4%, a sign that consumers are still spending on some discretionary items.
Overall, the report suggests consumers have pulled back a bit but not dramatically so. The retail sales report covers about one-third of consumer spending, with the other two-thirds consisting of spending on services. Economists expect overall consumer spending to grow in the April-June quarter.
βTodayβs data suggests consumers are downshifting, but they havenβt yet slammed the brakes,β Ellen Zentner, chief economic strategist for Morgan Stanley wealth management, said in an email. βLike the economy as a whole, consumer spending has been resilient in the face of tariff uncertainty.β
Yet many categories saw sharp declines. Car sales plunged 3.5%, while sales at home and garden centers dropped 2.7%. They fell 0.6% at electronics and appliance stores and 0.7% at grocery stores. There were some bright spots: Sales rose 0.9% at online retailers, 0.8% at clothing stores, and 1.2% at furniture stores.
Sales at restaurants and bars, a closely watched indicator of discretionary spending, fell 0.9% in May, though that followed a solid gain of 0.8% in April.
So far, Trumpβs tariffs havenβt yet boosted inflation. Consumer prices rose justΒ 2.4% in MayΒ compared with a year ago, the government said last week.
Many stores and brands, including Walmart, Lululemon, and J.M. Smucker Co., have said they plan to or have raised prices in response to tariffs.
Deckers Outdoor, which is behind such shoe labels as Hoka and Uggs, said late last month that it plans price increases, which will likely hurt sales.
βWe expect to absorb a portion of the tariff impact,β Chief Financial Officer Steven Fasching told analysts. βWe also believe there is potential to see demand erosion associated with the combination of price increases and general softness in the consumer spending environment.β
