Arrow-right Camera
The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

US retail sales drop for a second month, dragged down by cars

By Mark Niquette Bloomberg

U.S. retail sales fell for a second month in May, suggesting anxiety over tariffs and their finances prompted consumers to pull back after an early-year spending rush.

The value of retail purchases, not adjusted for inflation, decreased 0.9%, the most since the start of the year and restrained by autos, Commerce Department data showed Tuesday. That followed a downwardly revised 0.1% drop in April, marking the first back-to-back decline since the end of 2023.

Seven of the report’s 13 categories posted declines, dragged down by building materials, gasoline and motor vehicles – which came after a buying spree in anticipation of tariffs. Spending at restaurants and bars, the only service-sector category in the retail report, fell by the most since early 2023.

After loading up on purchases for cars and other goods to front-run President Donald Trump’s tariffs, the figures suggest consumers are pulling back spending. While the duties so far haven’t boosted U.S. inflation, consumer sentiment is still shaky and household finances have worsened amid a persistent rise in the cost of living and high interest rates.

While the administration made a trade deal with China this month and talks continue with other countries, Trump said last week he may raise U.S. auto tariffs “in the not too distant future” and is looking to set unilateral tariff rates in the coming weeks. A poll conducted for Bloomberg News last month showed three in five respondents reported cutting back due to concerns around a potential recession, largely on services like dining out and entertainment.

The retail data showed so-called control-group sales – which feed into the government’s calculation of goods spending for gross domestic product – increased 0.4% in May, supported by gains in sporting goods, furniture and apparel. The measure excludes food services, auto dealers, building materials stores and gasoline stations.

Before the figures, the Atlanta Fed’s GDPNow forecast penciled in a 3.8% increase for the second quarter, which would mark a rebound from a contraction at the start of the year on a monumental pretariffs import surge.

Federal Reserve officials have said that they’re waiting for more clarity on how Trump’s policies will impact the economy, and they’re widely expected to keep interest rates on hold this week. Policymakers will also release fresh economic forecasts, the first since Trump’s “Liberation Day” announcement of sweeping tariffs on April 2.