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Dow Jones NewsJun 17, 12:36 PM UTC
DJ May Retail Sales Drop More Than Expected, With 0.9% Decline -- Barrons.com
By Megan Leonhardt
Americans dialed back their spending last month, putting away their credit and debit cards after a flurry of buying in advance of expected tariff-related price increases.
U.S. retail and food services sales declined 0.9% in May from April, the Census Bureau reported Tuesday. That's a bigger pullback than economists surveyed by FactSet had forecast, expecting that retail sales would drop 0.7% month over month in May after a revised monthly decline of 0.1% in April.
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Americans likely slowed down their shopping last month, putting away their credit and debit cards after a flurry of buying in advance of expected tariff-related price increases.
Economists surveyed by FactSet are calling for a decline of 0.7% in total sales in May from April after a gain of just 0.1% in the prior month.
A number of economists project that May sales could be more grim than that. Pantheon Macroeconomics' Sam Tombs, for example, expects to see retail sales fell by approximately 1% last month. That would be the steepest drop recorded since March 2023.
Investors will find out at 8:30 a.m. on Tuesday, when the Census Bureau is expected to release the latest advance monthly data for retail and food services.
Less spending at gas stations as a result of lower gasoline prices is expected to help drive the drop in total sales. Spending on motor vehicles and home improvement supplies is expected to weaken as well.
Total sales excluding auto purchases are expected to be up 0.1% month over month in May, according to FactSet. The Chicago Fed's Advance Retail Trade Summary model, however, estimates that the monthly growth in retail sales excluding autos was 0.3% on a seasonally adjusted basis last month.
The so-called control group of retail sales -- it excludes autos, gasoline, building materials, and restaurant dining for a more consistent measure of spending -- is expected to gain 0.2% in May from April. The control-group data feed into calculations of gross domestic product.
Total debit and credit card spending per household was up 0.8% from a year earlier in May after a 1% gain in April, according to aggregated card data from Bank of America. But on a seasonally adjusted basis, spending was down 0.7% month over month.
Spending at restaurants largely held steady over the month, while purchases of lodging and airline tickets gained ground. The declines were biggest in home improvement, gas, and groceries, according to BofA's data.
While BofA's transaction data shows a notable slump in monthly spending growth, the Census Bureau's seasonal adjustments, which factor in issues like holidays, days in each month, and spending patterns, could help offset some of the expected decline, Aditya Bhave, U.S. economist at Bank of America Global Research, said in a research note released Thursday.
It appears that so far, total retail spending, particularly among the highest-income households, isn't as responsive to tariff announcements as initially expected, Bhave wrote. But online spending on electronics is different. Sales in that sector picked up immediately and forcefully after President Donald Trump disclosed 10% tariffs on all imports, plus higher levies on many countries -- including China -- in early April.
"Retail spending outside a few specific components appears to be holding up for now, partly because consumers so far have been spared major tariff-related price rises," Tombs said. "But real spending will feel the strain over the next few months, as price rises weigh more heavily on real after-tax incomes and the labor market deteriorates."
Write to Megan Leonhardt at megan.leonhardt@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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June 17, 2025 08:36 ET (12:36 GMT)
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