U.S. Retail Sales Plunge 0.9% in May, Second Consecutive Decline

U.S. retail sales have declined for the second consecutive month, indicating that concerns over tariffs and financial conditions have led consumers to reduce their spending following the initial surge in purchases at the start of the year. The U.S. Department of Commerce reported that retail sales, unadjusted for inflation, fell by 0.9% in May compared to the previous month, marking the largest decline since the beginning of the year. This drop was primarily driven by a decrease in automobile sales. The April data was revised downward to show a 0.1% decline, marking the first time since the end of 2023 that retail sales have decreased for two consecutive months.

Out of the 13 categories reported, seven showed declines, with the most significant drops observed in building materials, gasoline, and automobiles. Spending at restaurants and bars also saw its largest decrease since the start of 2023, making it the only service category in the retail report to experience a decline. Consumers had rushed to purchase cars and other goods ahead of the implementation of tariffs under the Trump administration, but the latest data indicates that they are now scaling back their spending. While tariffs have not yet significantly increased U.S. inflation, consumer confidence remains fragile, and household financial conditions have deteriorated due to rising living costs and high interest rates.

Core retail sales, which exclude food services, automobile dealers, building material stores, and gas stations, increased by 0.4% in May. This growth was driven by increases in sporting goods, furniture, and apparel. The overall economic environment, combined with financial concerns, has dampened consumer confidence, leading to a more cautious approach to spending. The impact of tariffs and financial worries has been particularly pronounced in sectors such as automobiles and building materials, which have seen the most significant drops in sales. The ongoing trade tensions and economic uncertainties have created a challenging landscape for retailers, as consumers remain hesitant to engage in large-scale purchases. The situation highlights the broader economic challenges faced by the U.S., as the retail sector plays a crucial role in driving overall economic growth. The decline in retail sales reflects a broader trend of economic slowdown, with consumers and businesses alike adopting a more conservative stance in response to the prevailing uncertainties. The future outlook for the retail sector remains uncertain, as the interplay between trade policies, consumer behavior, and economic conditions continues to evolve.