Retail Sales Drop as Consumers Pull Back on Spending: 6/20/2025

Earlier in the year, American consumers were spending money more freely in an attempt to be ready for sweeping tariffs being put in place by the White House.

Not so much recently, as figures released by the Commerce Department this week show.

Consumers pulled back from that kind of spending last month, precipitating a 0.9% dropped in sales at retail stores and restaurants, after seeing a 0.1% drop in April, both of which came after a 1.5% increase in March.

The May numbers were affected by a steep drop in auto sales, after car buyers had increased their purchasing in March, ahead of the White House’s  25% duty on imported cars and auto parts. Excluding autos, the Commerce figures showed sales fell 0.3% in May.

The sales drop comes after steep declines in consumer confidence this year, according to a report from The Associated Press. Still, inflation has cooled steadily, and unemployment is still low, which could fuel steady spending in the coming months, as the economy has remained mostly solid.

Trending
‘Highly Engaged Team’ Key to OxBlue’s Success

A category of sales that doesn’t include gas, cars, and restaurants rose last month by 0.4%, a sign that consumers are still spending on some discretionary items.

Overall, the report suggests consumers have pulled back a bit but not dramatically so, the AP reported. The retail sales report covers about one-third of consumer spending, with the other two-thirds consisting of spending on services. Economists expect overall consumer spending to grow in the April-June quarter.

“Today’s data suggests consumers are downshifting, but they haven’t yet slammed the brakes,” Ellen Zentner, chief economic strategist for Morgan Stanley wealth management, said in an email to the AP. “Like the economy as a whole, consumer spending has been resilient in the face of tariff uncertainty.”