• Retail sales fall 0.9% in May; second straight monthly drop
• Core retail sales increase 0.4%; April data revised up
• Manufacturing production edges up 0.1% on motor vehicles
• Import prices flat; weak dollar lifts core import inflation

Story

Retail sales fell by 0.9% in May from the prior month, the Commerce Department said Tuesday, down sharply from April’s downwardly revised 0.1% decline. That was the steepest monthly decline since January and worse than the 0.7% decrease economists projected in a poll by data firm FactSet.

The figures are adjusted for seasonal swings but not inflation.

The drop was mostly due to plummeting car sales. Excluding those purchases, retail sales were down a more modest 0.3%.

Early in the spring, Americans rushed to front-load purchases of big-ticket items, especially cars, to beat President Donald Trump’s stiff tariffs. That sent retail sales surging in March, but spending has downshifted markedly since then.

May’s report adds to evidence that Americans are becoming cautious with their spending, which could reverberate throughout the economy if it persists.

“Any time you get a pullback in consumer spending, it tends to lead to a slowdown in overall GDP and broader economic activity, which feeds in to slower sales, hiring and in turn slower income growth,” Gregory Daco, chief economist at Ernst & Young, told CNN’s Matt Egan in an interview.

“The real risk is we have the onset of a more pronounced slowdown in the economy, driven not necessarily by the actual tariffs but instead by a surge in anxiety that led to a front-loading in demand and will now lead to a demand cliff.”

Details from the report

Retail spending was down across most categories last month, especially at car dealerships. Car and auto parts sales declined 3.5% in May, the biggest monthly decline since June 2024.

Sales last month were also down sharply at gasoline stations — mostly due to falling energy prices — and at home improvement stores, declining 2% and 2.7%, respectively.

Meanwhile, spending at bars and restaurants declined 0.9% in May, the first monthly decline since February and the steepest one since February 2023. Whenever consumers cut back, discretionary spending, such as eating out at restaurants, is usually first on the chopping block.

Sales in May were up at specialty stores and online.

More economic weakness ahead?

Consumer spending is the lifeblood of the US economy, and its trajectory from here out largely depends on what happens with the labor market.

“Consumers are on the sidelines as the job market weakens and Americans grapple with higher prices,” David Russell, global head of market strategy at TradeStation, said in analyst note Tuesday. “It could be a pause before confidence rebounds, or a warning before a broader slowdown.”