Retail Sales Register Largest Drop in 4 Months as Consumers Pull Back

Consumers did not stock up on products in May like they did in March and April.

People shop at a retail store in New York City on March 21, 2025. Samira Bouaou/The Epoch Times

Retail sales fell sharply in May, driven by falling gasoline sales and economic uncertainty, the Department of Commerce reported on June 17.

Last month, non-inflation-adjusted retail sales tumbled by 0.9 percent, down from the 0.1 percent dip in April.

This came in below the consensus forecast of a 0.7 percent decline and was the biggest drop since January.

According to the Commerce Department, sales at motor vehicle and parts dealers led the decline in May, sliding by 3.5 percent. This was followed by building material and garden equipment suppliers (negative 2.7 percent) and gasoline stations (negative 2 percent).

But receipts at furniture stores surged by 1.2 percent. Apparel retail and online sales climbed by 0.9 percent and 0.8 percent, respectively.

Retail sales rose by 3.3 percent year over year, down from the 5 percent year-over-year increase in April.

Core retail sales, which strip out automobiles and gas, fell at a worse-than-expected pace of 0.1 percent.

Ted Rossman, senior industry analyst at Bankrate, attributes the consumer pullback largely to shoppers front-running U.S. tariffs.

“Americans stocked up on things like cars and furniture that they feared would soon become more expensive,” Rossman said in a statement to The Epoch Times.

“We didn’t see as much stocking up in May, in part because many tariffs were delayed or rolled back, and also because some demand that otherwise would have appeared in May was accelerated by a month or two.”

However, a measure factored into gross domestic product (GDP) calculations—the retail sales control group—surged by 0.4 percent, slightly higher than the market estimate of 0.3 percent. This gauge omits transactions at places such as building materials suppliers and gas stations.

The new consumer figures could be the start of weakness appearing in the economic data, said Chris Zaccarelli, chief investment officer at Northlight Asset Management.

“Weak consumer spending [on June 17] finally shows a connection between soft data and hard data, as the negative consumer sentiment surveys we’ve been seeing are now showing in the month-over-month Retail Sales numbers,” Zaccarelli said in a note emailed to The Epoch Times.

Over the past few months, consumer surveys have indicated deteriorating confidence and sentiment regarding the broader economy. However, as trade policy stabilizes and the White House reaches new agreements, sentiment has improved.

Last week, the University of Michigan’s preliminary June Index of Consumer Sentiment rebounded firmly above market expectations, climbing to its highest level since February.

The RealClearMarkets/TIPP Economic Optimism Index also advanced on renewed optimism surrounding the economy and personal finances.

Zaccarelli said May was the first negative reading for core sales, “and it could be a one-off.”

“We would need to see one or two more months of negative numbers before calling it a trend,” he said.

Optimism or Caution Ahead

U.S. households are taking a more cautious approach to spending than they have in recent years.

According to the Bureau of Economic Analysis, the household savings rate rose to 4.9 percent from 4.3 percent in March.

A May 9 report by the Bank of America Institute found that seasonally adjusted spending per household was flat in April.

“The gradual easing in consumer spending momentum is not just due to lower inflation—the growth in the number of transactions has also cooled,” the report states. “Consumers appear to be pulling back particularly on bigger ticket discretionary services like airline tickets and lodging.”

Total U.S. consumer credit, meanwhile, surged by nearly $18 billion in April, up from a $10.17 billion increase in March, Federal Reserve data show. The surge was also higher than economists’ expectations of a $10.85 billion jump.

Revolving credit, such as credit cards, soared by 7 percent year over year. Nonrevolving credit, such as auto and student loans, rose at an annual rate of 3.3 percent.

Mixed soft and hard data reflect uncertainty among businesses and consumers. However, economic conditions remain largely intact, even as President Donald Trump’s sweeping global tariffs have upended international commerce.

On the labor front, the economy created a better-than-expected 139,000 new jobs in May, and the demand for labor remains strong, with 7.4 million job openings.

Price pressures have also yet to materialize in the government’s numbers.

The consumer price index and the Fed’s preferred personal consumption expenditures price index hovered slightly above the U.S. central bank’s 2 percent target.

Additionally, the producer price index—a gauge of prices paid for goods and services by businesses that serves as a possible precursor to consumer inflation—was little changed in May.

Import prices remained unchanged at zero percent in May, while export prices declined by 0.9 percent, according to the Bureau of Labor Statistics.

As for the broader economy, the Atlanta Fed’s widely watched GDPNow model—a running estimate of economic growth—suggests that the economy will rebound in the second quarter, rising by 3.8 percent. In the first three months of 2025, the GDP contracted by 0.2 percent for the first time since early 2022.

Still, the United States is not out of the woods just yet, Rossman said.

“Will we see a flood of trade agreements?” he said. “Another extension? The implementation of higher tariffs? Some combination of the three? Relative optimism has reigned on Wall Street in recent weeks, although there’s a lot we don’t know about the path forward.”

The president’s 90-day pause on reciprocal tariffs is set to expire on July 9.