Retail sales decline among Americans, projected as cautious spending patterns after a jump in spring purchases to bypass tariffs' impact
WASHINGTON - Consumers tightened their wallets in May, as they grappled with rising prices due to President Trump's import tariffs on numerous goods. The Commerce Department confirmed Tuesday that retail sales dropped a steep 0.9%, following a meager 0.1% slump in April.
Sales at physical stores and eateries faltered, with car sales, home and garden centers, electronics, appliances, and groceries all reporting declines. Yet, some industries managed to buck the trend, with online retailers, clothing shops, and furniture stores recording gains.
Eating out proved to be a discretionary luxury that consumers were willing to cut back on, with restaurant and bar sales sliding 0.9%. The dip followed a strong gain of 0.8% in April.
Alarm bells are ringing for retailers, who have been contending with an oversupply of inventory precipitated by Trump's tariff warnings. The flow of goods into the country, as evidenced by the Port of Los Angeles, has markedly slowed in recent weeks.
Many consumer product manufacturers claim tariffs have nudged up their expenses and reduced sales. Picnic Time, a firm that specializes in picnic accessories, has noticed a 40% decrease in orders from retailers compared to last summer. The decline is due to retailers' cautiousness towards potential price hikes and uncertainty about their customers' spending habits. Approximately 80% of Picnic Time's goods are manufactured in China, reflecting the far-reaching impact of the tariffs.
The higher costs are forcing Picnic Time to increase their prices by an average of 11% to 14% for this year's summer season. A folding outdoor chair, originally priced at $120 in late 2024, is now being sold for $137 this month. The increased prices, coupled with buyer sensitivity to costs, have dragged down the company's sales even as some customers preemptively made purchases out of concern about price hikes.
Faced with higher tariff costs, Picnic Time has implemented a hiring freeze. In the first half of 2025, the company has already shelled out $1 million in tariffs, more than triple what it spent in the equivalent period in 2024.
The retail sales barometer is not the only indication of consumer apprehension about escalating prices due to tariffs. Malls report slowing sales as retailers push back-to-school promotions to this month from July in a bid to attract customers for fear that they may shrink their spending during the later months when prices are expected to rise further.
Trump's tariffs have yet to significantly drive up inflation, as reported by the government last week, but concerns linger about their impact on consumer budgets later in the year.
Dig Deeper:
U.S. clothes, toy costs show tariff hit only at margins so farU.S. inflation gauge cools with little sign of tariff impact, so farTariffs, inflation and leery customers are hitting retailers in different ways
- Despite the drop in retail sales, the online retail sector and select offline stores like clothing shops and furniture stores witnessed growth, indicating a shift in consumer behavior due to the economic climate in California.
- The uncertainty surrounding tariffs has led to a cautious approach among retailers, with some opting to push back-to-school promotions earlier in the year to tap into consumer spending before potential price increases.
- Manufacturers in California's economy, such as Picnic Time, have faced increased expenses due to tariffs, forcing them to raise prices and implement hiring freezes.
- In response to growing concerns about tariffs and their impact on consumer budgets, the government is closely monitoring inflation rates for signs of any significant upward trend.
