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US retail sales fell by the most in two years in May, according to official data, following an earlier stockpiling burst as uncertainty over tariffs continues to distort consumer spending behaviour.
Sales of $715.4bn were down 0.9 per cent from April, figures released by the US Census Bureau on Tuesday showed. The number, which was below economists’ expectations, marked the biggest monthly fall since March 2023. April’s move was revised lower to a 0.1 per cent decline.
The drop-off follows a spending surge in March when Americans bulked up on purchases — particularly of cars and auto parts — amid anxiety over the impact of President Donald Trump’s looming tariffs on foreign imports.
“The consumer has been the dominant driver of US growth since the pandemic. Today’s data underscores that this is no longer necessarily the case,” ING chief international economist James Knightley said.
“The tariff-led frontloading is now unwinding — particularly in the auto sector — and that has been dragging down the retail sales numbers.”
A separate report from the US Federal Reserve on Tuesday showed industrial production was also worse than expected in May, slipping 0.2 per cent.
Tuesday’s spending figures highlight the volatility in consumer purchasing habits caused by the US president’s trade war. Trump has repeatedly threatened sweeping tariffs on trading partners, often before later pulling back.
Automotive sales fell the most sharply, sliding 3.5 per cent in May. Spending at bars and restaurants also dropped, as did building supply purchases.
“You can see cracks forming in spending,” said Joe Brusuelas, chief economist at RSM US. “We should be wary about the direction of consumption going forward.”
But some economists said the fluctuations — which were exacerbated by unusually wet weather conditions on the US east coast — masked relatively stable underlying spending in less volatile categories. That suggests the full impact of the tariffs has yet to be felt by consumers.
Stripping out sales at car dealers, petrol stations and restaurants, so-called “core” retail sales rose by 0.1 per cent month on month and 3.9 per cent year on year, the National Retail Federation said.
“Consumers are seeing their way through the uncertainty with trade policies, but I expect the inflation associated with tariffs to be felt later this year,” said Jack Kleinhenz, NRF’s chief economist.
Tariff announcements have had a “clear impact” on the timing of big-ticket items such as cars, according to Oxford Economics deputy chief economist Michael Pearce. But there are “very few signs” the restrictions are thus far leading to a broader pullback in consumer spending.
“We expect a more marked slowdown to take hold in the second half of the year, as tariffs begin to weigh on real disposable incomes,” Pearce said.
Additional reporting by Gregory Meyer in New York
