Americans are experiencing a spending slowdown as they cope with uncertainty surrounding President Trump’s tariffs. In May, retail sales dropped 0.9% from the previous month, the steepest decline since January and worse than economists’ expectations.
The decline was largely driven by plummeting car sales, which fell 3.5% in May. Excluding auto purchases, retail sales were down 0.3%. This marks a reversal from March, when Americans rushed to buy big-ticket items before tariffs took effect, leading to a surge in spending.
The economic slowdown may have implications for the overall economy, as consumer spending is a crucial driver of growth. Experts warn that a prolonged decrease in spending could lead to slower sales, hiring, and income growth.
“The pullback in consumer spending tends to lead to a slowdown in overall GDP and broader economic activity,” said Gregory Daco, chief economist at Ernst & Young. “The real risk is a more pronounced slowdown in the economy driven by anxiety rather than actual tariffs.”
Retailers saw declines across various categories, including car dealerships (-3.5%), gasoline stations (-2%), home improvement stores (-2.7%), and bars and restaurants (-0.9%). However, sales were up at specialty stores and online.
Economists caution that the labor market may be weakening, which could further impact spending. Unemployment remains low (4.2%), but employers are adding jobs at a slower pace. If unemployment starts to climb, spending data would likely weaken as Americans who are out of work cut back on discretionary spending.
Source: https://edition.cnn.com/2025/06/17/economy/us-retail-sales-may