US Retail Sales Fall 0.9% in May Amid Tariff Impact

U.S. retail sales dropped sharply by 0.9% in May 2025, exceeding economists' expectations, largely due to a steep decline in auto sales after a March surge driven by consumers buying ahead of President Trump's 25% tariff on imported cars and parts. Excluding autos, retail sales fell 0.3%, with notable decreases in home and garden centers, electronics, and grocery stores, while online, clothing, and furniture sales saw modest gains. The decline follows a period of reduced consumer confidence and cautious spending, as many retailers built up large inventories in anticipation of import taxes, impacting orders and pricing strategies. Despite these challenges, inflation has steadily cooled, and unemployment remains low, which could support steadier spending in coming months. Tariff-induced uncertainties have led some companies, like Picnic Time, Inc., to experience significant order reductions and price increases, reflecting the broader impact on consumer goods costs and sales. Federal Reserve officials are closely watching these trends amid ongoing tariff tensions and geopolitical concerns affecting domestic demand.