By CHRISTOPHER RUGABER and ANNE D’INNOCENZIO, Associated Press Economics Writer
WASHINGTON (AP) — Retail sales fell sharply in May as consumers pulled back after a sharp increase in spending in March to get ahead of President Donald Trump’s sweeping tariffs on nearly all imports.
Sales at retail stores and restaurants dropped 0.9% in May, the Commerce Department said Tuesday, after a decline of 0.1% in April. The figure was pulled down by a steep drop in auto sales, after Americans ramped up their car-buying in March to get ahead of Trump’s 25% duty on imported cars and car parts. Excluding autos, sales fell 0.3%.
The sales drop comes after sharp declines in consumer confidence this year. Still, inflation has cooled steadily and unemployment remains low, which could fuel steady spending in the coming months, as the economy has remained mostly solid.
A category of sales that excludes volatile sectors such as gas, cars, and restaurants rose last month by 0.4%, a sign that consumers are still spending on some discretionary items.
Yet many categories saw sharp declines. Car sales plunged 3.5%, while sales at home and garden centers dropped 2.7%. They fell 0.6% at electronics and appliance stores and 0.7% at grocery stores. There were some bright spots: Sales rose 0.9% at online retailers, 0.8% at clothing stores, and 1.2% at furniture stores.
Sales at restaurants and bars, a closely watched indicator of discretionary spending, fell 0.9% in May, though that followed a solid gain of 0.8% in April.
It is a difficult time for retailers, many of whom built up large inventories this spring after Trump warned that he would impose widespread import taxes. Traffic at the port in Los Angeles has fallen sharply in recent weeks, suggesting fewer goods are entering the United States.
Some consumer products companies say they are seeing the impact of tariffs on their own costs and sales.
Paul Cosaro, CEO of Picnic Time, Inc, which makes picnic accessories like baskets, coolers, and folding chairs, said that orders from retailers are down as much as 40% this summer compared with a year ago. His company sells to a variety of stores like Target and Williams-Sonoma.
Cosaro noted that some stores have been cautious because they’re not sure how shoppers will react to higher prices. Some cancelled orders because Cosaro couldn’t tell them how much the new prices would be due to all the uncertainty. Roughly, 80% of the company’s goods are made in China, with the rest in India and Vietnam.
The company, founded roughly 40 years ago and based in Moorpark, California, was forced to raise prices on average from 11% to 14% for this summer selling season, Cosaro said.
The company has implemented a hiring freeze because of all the extra tariff costs, he added. So far this year the company, which employs from 70 to 100 people, has had to pay $1 million in tariffs. A year ago at this time, the bill was a third of that amount.
D’Innocenzio reported from New York.