Retail Sales Drop as Pre-Tariff Surge in Car Sales Ebbs

U.S. retail and food services sales saw a month-over-month decline of 0.9% in May after slipping 0.1% in April, the Census Bureau reported Tuesday (June 17).

The greatest declines were in the automotive and building materials sectors, the Bureau said in a Tuesday press release.

The drops in those sectors suggest that after consumers raced to buy those products earlier this year before new tariffs kicked in, they are now pulling back on their spending, Bloomberg reported Tuesday.

The report said that while tariffs have not increased inflation, they have impacted consumer sentiment, which was already being driven down by a rising cost of living and high interest rates.

In addition, sales gains reported by other kinds of businesses suggest that the overall decline was temporary, consumption remains healthy and sales may pick up in June, per the report.

Reuters reported Tuesday that the decline in retail sales in May was larger than expected and was likely due to consumers making auto purchases ahead of the tariffs.

The report added that solid wage growth continues to support overall consumer spending.

It was reported June 3 that auto sales returned to a normal level in May after spiking for two months when consumers sought to avoid the upcoming tariffs. Part of the slowdown was caused by inventory levels, which dropped during the two-month surge in sales.

According to the Census Bureau press release, the kinds of businesses that saw the biggest month-over-month declines in sales in May included motor vehicle and parts dealers, which were down 3.5%, and building material and garden equipment and supplies dealers, which were down 2.7%.

Five other sectors saw smaller declines, with gas stations down 2.0%, food services and drinking places down 0.9%, food and beverage stores down 0.7%, electronics and appliance stores down 0.6%, and health and personal care stores down 0.1%.

Six other kinds of businesses tracked by the Census Bureau saw month-over-month sales increases in May. They include miscellaneous store retailers, up 2.9%; sporting goods, hobby, musical instrument stores and bookstores, up 1.3%; furniture and home furnishings stores, up 1.2%; non-store retailers, up 0.9%; clothing and clothing accessories stores, up 0.8%; and general merchandise stores, up 0.1%.

The U.S. retail and food services sales figure for the previous month, April, was revised down, according to the release. The 0.1% month-over-month drop reported for April replaced the previous estimate of a 0.1% gain.