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Tariffs

Retail Sales Fall Sharply in May Amid Tariff Uncertainty

Strategic Insights

— 2 min read

Consumers pulled back from a spending surge early in the year to avoid paying higher prices on imported goods due to President Donald Trump's tariffs. Retail sales declined 0.9% in May, with auto sales plummeting by 3.5%. Excluding autos, sales fell 0.3% in May. Despite the decline, a category of sales that excludes volatile sectors such as gas, cars, and restaurants rose by 0.4%. Economists expect consumer spending to grow in the April-June quarter, with overall consumer spending covering about one-third of consumer spending, and the other two-thirds consisting of spending on services.

Key Takeaways:

  • Retail sales fell sharply in May, declining 0.9%, with auto sales plummeting by 3.5%.
  • Excluding autos, sales fell 0.3% in May, with categories such as home and garden stores, electronics and appliance stores, and grocery stores seeing declines.
  • Sales at restaurants and bars fell 0.9% in May, though that followed a solid gain of 0.8% in April.
  • Online retailers saw a bright spot, with sales rising 0.9%, as well as clothing and furniture stores.
  • Gas station sales dropped sharply, by 2%, largely due to lower prices.
  • Some consumer products companies, such as PICNIC Products, are seeing the impact of tariffs on their costs and sales, with orders from retailers down by as much as 40% this summer compared to a year ago.
  • Roughly 80% of PICNIC Products' goods are made in China, with the company forced to raise prices on average from 11% to 14% for this summer selling season.
  • The company's sales are still down this year, despite some shoppers accelerating their purchases out of concern that prices would rise.
  • Shifting consumer behavior is evident in the increasing popularity of price-conscious habits, as exemplified by Liza Gresko, a 42-year-old mother of three in Doylestown, Pennsylvania, who has started buying groceries in bulk and switching to generic brands.
  • Retailers are pushing up back-to-school promotions to this month from July, fearing consumers may not want to spend in the later months when prices will likely rise.

Statistics:

  • Retail sales fell 0.9% in May.
  • Auto sales plunged by 3.5%.
  • Sales rose 0.9% at online retailers.
  • Sales dropped sharply by 2% at gas stations.
  • Roughly 80% of PICNIC Products' goods are made in China.
  • The company's sales are down this year by an undisclosed amount.
  • Orders from retailers are down by as much as 40% this summer compared to a year ago.
  • Consumer prices rose 1% compared to a year ago.
  • The company's CEO, Paul Cosaro, stated that the company has had to pay $1 million in tariffs so far this year.

Sources:

  • WASHINGTON (AP) — Retail sales fell sharply in May as consumers pulled back from a spending surge early this year to get ahead of President Donald Trump’s tariffs on nearly all imports. Sales at retail stores and restaurants dropped 0.9% in May, the Commerce Department said, after a decline of 0.1% in April. Sales jumped 1.5% in March. (The Associated Press, May 28, 2025)
  • “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.” (The Associated Press, May 28, 2025)
  • Paul Cosaro, CEO of PICNIC Products, stated that orders from retailers are down as much as 40% this summer compared with a year ago, with the company forced to raise prices on average from 11% to 14% for this summer selling season. (The Associated Press, May 28, 2025)

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