Retail sales fell sharply in May as consumers pulled back from a spending surge earlier this year to get ahead of President Donald Trump’s sweeping tariffs on nearly all imports.
Sales at retail stores and restaurants dropped 0.9% in May, the U.S. Commerce Department said Tuesday, following a 0.1% decline in April. The figure was pulled down by a steep drop in auto sales, after Americans ramped up car-buying in March to beat Trump’s 25% duty on imported cars and car parts. Excluding autos, sales fell 0.3%.
The decline comes after sharp drops in consumer confidence this year. Still, inflation has cooled steadily and unemployment remains low — conditions that could support stable spending in the coming months, as the economy remains mostly solid.
A category of sales that excludes volatile sectors such as gas, cars and restaurants rose by 0.4% last month, indicating consumers are still spending on some discretionary items.
Overall, the report suggests consumers have pulled back, but not dramatically. The retail sales report covers about one-third of consumer spending, with the rest consisting of services. Economists expect overall consumer spending to grow in the April–June quarter.
“Today’s data suggests consumers are downshifting, but they haven’t yet slammed the brakes,” Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, said in an email. “Like the economy as a whole, consumer spending has been resilient in the face of tariff uncertainty.”
Still, many categories saw sharp declines. Car sales plunged 3.5%, while home and garden centres dropped 2.7%. Sales fell 0.6% at electronics and appliance stores and 0.7% at grocery stores. There were bright spots: online retailers rose 0.9%, clothing stores gained 0.8%, and furniture stores climbed 1.2%.
Sales at restaurants and bars — a closely watched indicator of discretionary spending — fell 0.9% in May, following a solid 0.8% gain in April.
Some consumer products companies report feeling the impact of tariffs on both costs and sales.
Paul Cosaro, CEO of Picnic Time Inc., which makes picnic accessories like baskets, coolers and folding chairs, said retailer orders are down as much as 40% this summer compared with a year ago. His company sells to stores including Target and Williams-Sonoma.
Cosaro said some stores are cautious because they don’t know how shoppers will respond to higher prices. Some cancelled orders because he couldn’t provide firm pricing amid tariff uncertainty. Roughly 80% of the company’s goods are made in China, with the rest in India and Vietnam.
The company, founded about 40 years ago and based in Moorpark, Calif., was forced to raise prices by 11% to 14% for this summer selling season, Cosaro said.
A folding outdoor chair now costs $137, up from $120 in late 2024. Despite some shoppers accelerating purchases in anticipation of price hikes, the company’s sales are still down this year.
“Shoppers are very price sensitive,” Cosaro said.
Liza Gresko, a 42-year-old mother of three in Doylestown, Pa., said she has noticed prices for basics like toothpaste and shampoo starting to rise again. She has begun buying groceries in bulk and switching to generic brands to save money.
“If I make these small changes, then we are sacrificing for the long-term goal of saving more,” Gresko said.
She has also started shopping at thrift stores for children’s clothing instead of Macy’s or H&M.
“Even with store sales and discounts, the rising costs make it unsustainable to continually purchase new clothing,” she said.
Cosaro said the company has implemented a hiring freeze due to increased tariff costs. So far this year, the company — which employs between 70 and 100 people — has paid $1 million in tariffs, triple the amount it paid a year ago.
The retail sales report follows other indicators that show shoppers are pulling back amid worries about rising prices tied to Trump’s tariffs.
Naveen Jaggi, president of retail advisory services in the Americas for real estate firm JLL, said mall operators are seeing a slowdown in sales heading into the summer months. Retailers have moved up back-to-school promotions to this month from July, aiming to attract early shoppers before further price increases.
So far, Trump’s tariffs have not significantly boosted inflation. Consumer prices rose 2.4% in May 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 already have, raised prices in response to tariffs.
Deckers Outdoor, the company behind Hoka and Uggs, said late last month that it plans price increases, which are likely to weigh on sales.
“We expect to absorb a portion of the tariff impact,” chief financial officer Steven Fasching told analysts. “We also believe there is potential to see demand erosion associated with the combination of price increases and general softness in the consumer spending environment.”