According to the United States Census Bureau, retail sales in the US fell 0.9% in May. This drop was steeper than the predicted 0.6% decline from the Dow Jones consensus. This decline follows a very slight 0.1% decrease in April. Politically, it signals increasing alarm among consumers as tariffs and geopolitical tensions drag on.
The new data, which was just released by the Commerce Department, shows a huge drop in many retail categories. Sales in motor vehicles and parts retailers had the largest decline, falling by 3.5%. Bars and restaurants were hit especially hard, with these hospitality sales down by 0.9%. These cuts take effect just as consumer confidence seems to be faltering.
Overall retail sales fell by 0.3% after removing automobile sales. This drop marks a reversal from projections that had estimated a slight increase of 0.1%. When considering a broader range of items—excluding auto dealers, building materials suppliers, and gas stations—retail sales actually increased by 0.4%. At the same time, this means that in some sectors, things are not as bleak as expected and are actually exceeding expectations.
More strikingly, establishment retail sales in the building materials and garden supply store category fell by 2.7%. Further, tumbling energy costs were a major factor in pushing down 2% gasoline station revenues. Trade miscellaneous retailers posted a solid 2.9% gain. At the same time, online sales jumped 0.9%, a sign of consumer preference for how and where to shop. Furniture stores did well too, rising 1.2% from July.
The trends observed in May can be partly attributed to consumer behavior in March when many Americans made significant purchases ahead of anticipated tariffs on imported goods. This vehicle purchase rush is reflected in a dramatic drop in showroom traffic at car dealerships across the country throughout May.
Retail sales took a beating, but import prices surprisingly didn’t budge, against expectations for a 0.1% drop. By way of comparison, export prices fell by 0.9% over the same period. These troubling economic indicators highlight the myriad of complexities weighing down consumer spending and retail performance.