Retail sales across the United States plummeted to unexpected lows in May, showing that consumers are playing it safe. That’s despite the Commerce Department coming out Friday and reporting a 0.9% drop in sales in stores and restaurants. That marks a 0.5% overall decline continuing the downward trend that began with a 0.1% decrease in April. This transition follows a stimulus-driven spike in consumer spending at the start of the year, much of it determined by federal policy.
May was a particularly sharp drop, all the more so coming on the heels of that big spending boom in March. This jump is mostly due to President Donald Trump’s massive new tariffs on almost all imports. Expecting a 25% tariff on all imported automobiles and car parts, Americans rushed to purchase cars and trucks in March. This incredible increase would not last. Retail auto sales were particularly hard hit by the COVID-19 pandemic and subsequent stay-at-home orders, sinking retail sales overall.
Not all sectors experienced declines. From the release, online retailers further increased their sales by 0.9%. Apparel stores took in more, rising 0.8%, and home furnishings stores turned in a noteworthy 1.2% advance. Home and garden centers had their worst month, down 2.7% in sales. Electronics and appliance stores fell by 0.6% and grocery stores fell by 0.7% as well.
In a sign of broader weakness, excluding the volatile auto sector, retail sales still declined by 0.3%. Fewer cars, longer waits. Cautious consumer spending habits have an impact on far more than car purchases alone. Consumers are rethinking their spending on a variety of categories.
Although retail sales remain in a pronounced downturn, the larger economic picture produced by these other indicators indicates an overall stability. Inflation has continued to moderate, giving consumers a bit of breathing room and unemployment is still low. This context suggests that while Americans are pulling back on spending, the fundamentals of the economy may still support recovery and growth in other areas.
This data underlines the reality that consumers are still figuring out how to respond to dangerous and unpredictable economic tides. As they navigate the complexities of tariffs and inflation, understanding these shifts will be crucial for retailers looking to adapt their strategies moving forward.
