Consumers in the United States cut back on spending in May, leading to a significant 0.9% drop in retail sales, according to a recent report from the Commerce Department.
According to CNBC, this reversal showcases the growing anxieties over economic conditions, despite some positive signals in select sectors. Retail sales have been sluggish this year, often reflective of the broader economic concerns, such as tariffs and geopolitical uncertainties.
The figures released on Tuesday showed a decline deeper than the 0.6% drop economists had predicted, according to Dow Jones forecasts. April had already hinted at this negative trend with a 0.1% decline, making the May figures a stark continuation.
While the data account for seasonal changes, they do not adjust for inflation, leaving a cloudy picture of genuine consumer behavior.
Retail areas such as auto sales saw notable declines, with motor vehicle and parts retailers experiencing a 3.5% slide in May.
On the contrary, online sales managed to see a positive boost, growing by 0.9% during the same period. Discount hunters benefited, sparking a 2.9% increase in sales among miscellaneous retailers.
Heather Long, chief economist at Navy Federal Credit Union, remarked on a trend where consumers are cautious, even reluctant, reflecting that families are wary of price increases and more selective in spending.
Fuel prices also influenced these spending patterns, as gasoline station receipts decreased by 2.0% following lower energy prices. Building materials and garden supplies echoed this restraint, with a sales decline of 2.7% noted in May.
Despite these challenges, some areas like furniture stores saw growth, posting a 1.2% increase in sales. This uptick indicates that certain consumer segments are continuing to invest in durable goods during these uncertain times.
Furthermore, recent improvements in consumer sentiment surveys provide a hint of optimism amidst ongoing trade tensions.
The financial markets reacted sharply to the downturn, with stock futures struggling and treasury yields falling following the data release. Such financial moves reflect investor concerns over continued volatility in spending patterns and potential GDP impacts.
Indeed, GDPNow's tracker, which foresaw a robust second-quarter growth of 3.8% before these figures, is poised for a reassessment.
The tariff-driven trade war prompted earlier in the year by President Trump's announcements continues to haunt consumer decisions. This environment of ongoing negotiations has moderately eased with temporary rhetorical softening, yet the looming risks remain.
Even as import prices held flat, export prices declined by 0.9%, revealing trade tensions' strain on the broader economic landscape.