Christopher Lugerber and Anne Die Inogio, AP Economics author
WASHINGTON (AP) – Retail sales fell sharply in May. Consumers were pulled back from a surge in spending earlier this year to remove tariffs that President Donald Trump excludes almost all import duties.
After a 0.1% drop in April, the Commerce Department said it said Tuesday. That figure was reduced by a sharp drop in car sales after Americans stepped up their car purchases in March to overcome Trump’s 25% obligation on imported cars and car parts. Excluding cars, sales fell 0.3%.
The decline in sales has been conflicting after a sharp decline in consumer trust this year. Still, inflation has cooled steadily, unemployment remains low and the economy remains largely robust, which could drive stable spending in the coming months.
Sales categories that exclude volatile sectors such as gas, automobiles and restaurants increased 0.4% last month. This indicates that consumers are still spending on discretionary items.
Overall, the report suggests that consumers have pulled back a bit, but not dramatically. Retail sales reports cover about a third of consumer spending, with the other two thirds consisting of spending on services. Economists expect overall consumer spending to rise in the April-June quarter.
“Today’s data suggests that consumers are downshifting, but they haven’t yet criticised the brakes,” Erenzentner, chief economic tractist at Morgan Stanley Wealth Management, said in an email. “Like the economy as a whole, consumer spending was resilient in the face of tariff uncertainty.”
However, there was a sharp decline in many categories. Car sales plummeted 3.5%, while sales at home and garden centres fell 2.7%. Electronics and electronics stores fell by 0.6% and grocery stores by 0.7%. There were some bright spots: sales rose 0.9% in online retailers, 0.8% in clothing stores and 1.2% in furniture stores.
Sales at restaurants and bars, closely monitored indicators of discretionary spending, fell 0.9% in May, but continued to earn 0.8% in April.
Some consumer product companies say they see the impact of customs duties on their own costs and sales.
Paul Cosaro, CEO of Picnic Time, Inc., has produced picnic accessories such as baskets, coolers and folding chairs, and said orders from retailers have fallen 40% this summer compared to a year ago. His company sells to a variety of stores, including Target and Williams-Sonoma.
Cosaro noted that some stores are cautious as they don’t know how shoppers will respond to higher prices. Cosaro canceled the order because he was unable to tell us how much the new price was due to all the uncertainty. Approximately 80% of the company’s products are made in China, while the rest are made in India and Vietnam.
Founded around 40 years ago, the Moore Park, California-based company was forced to raise prices this summer’s sales season from an average of 11% to 14%, Cosaro said.
Folding outdoor chairs were $137 this month, up from $120 in the second half of 2024, he added. The company’s sales are still falling this year, despite some shoppers speeding up their purchases due to concerns about price increases.
“Shoppers are very price sensitive,” Kosalo said.
Liza Gresko, a 42-year-old mother of three from Doylestown, Pennsylvania, said she saw the prices of basics like toothpaste and shampoo begin to rise again, and she began buying a lot of food to save money and switch to popular brands.
“If we make these small changes, we’re at the expense of our long-term goals of saving more,” Gresco said.
She also started shopping at thrift stores to prepare children’s clothes rather than Macy’s or H&M.
“Even if there are store sales and discounts, the rising costs make it unsustainable to continue purchasing new clothing,” she said.
The company is implementing employment freezes for all additional fees, he added. So far, companies employing between 70 and 100 people have had to pay $1 million in customs duty. A year ago, the bill was one-third of that amount.
The retail sales report comes as there is other evidence that shoppers are pulling back more amid concerns about rising prices from Trump’s tariffs.
Naveen Jaggi, president of America’s Retail Advisory Services for Real Estate Company JLL, said he has heard that sales from the mall are slowing towards the official summer months. Retailers are pushing up promotions that have come back to school from July until this month, he said. He said they want to attract shoppers early because of fear that consumers may not want to spend in the late period where prices are likely to rise.
So far, Trump’s tariffs have not yet driven inflation. The government said last week that consumer prices had risen just 2.4% in May compared to a year ago.
Many stores and brands, including Walmart, Lululemon and JM Smucker Co., have said they plan to raise prices in response to tariffs or plan to raise prices.
Deckers Outdoor, behind shoe labels such as Hoka and Uggs, said it was planning to raise prices later last month, saying it is likely to undermine sales.
“We hope to absorb some of the impact of the tariffs,” Chief Financial Officer Stephen Fassing told analysts. “We also believe that we may see demand erosion associated with a combination of price increases and general softness in the consumer spending environment.”
d’Hynenzio was reported from New York.
Original issue: June 17, 2025 9:12am EDT
