Retail sales in the United States unexpectedly fell for the second month in a row! A decline in car sales dragged down the May data, leading to a 0.9% decrease compared to the previous month.

Retail sales in the United States fell for the second consecutive month in May, indicating that consumers are beginning to cut back on spending due to concerns about tariffs and personal finances following the spending spree at the beginning of the year. Data from the U.S. Commerce Department on Tuesday showed that retail sales, not adjusted for inflation, fell by 0.9% compared to the previous month, marking the largest drop so far this year, with car sales dragging down overall figures. Previous data for April was revised to show a decrease of 0.1%, marking the first consecutive two-month decline since the end of 2023. Among the 13 categories in the report, seven saw declines, with building materials, gasoline, and motor vehicle sales leading the way - these categories had seen a surge in purchases by consumers stockpiling before the implementation of tariffs. As the only service industry category in the retail report, restaurant and bar spending saw its largest decline since early 2023. The data suggests that after consumers rushed to buy cars and other goods to avoid President Trump's tariffs, they are now significantly cutting back on spending. While current tariffs have yet to raise inflation in the United States, consumer confidence remains fragile in the face of rising living costs and a high-interest rate environment, and households' financial situations continue to deteriorate. Despite reaching a trade agreement with China this month and ongoing negotiations with other countries, President Trump stated last week that he may "soon" increase tariffs on automobiles and plans to unilaterally set tariff rates in the coming weeks. A survey conducted last month showed that three-fifths of respondents are cutting back on spending due to concerns about a potential economic downturn, mainly focusing on services such as dining and entertainment. Retail data showed that "control group sales," used in government GDP calculations for May, increased by 0.4%, driven mainly by sports equipment, furniture, and clothing sales. This indicator excludes data from restaurants, car dealerships, building material stores, and gas stations. Before the data was released, the Atlanta Federal Reserve's GDPNow model predicted second-quarter economic growth of 3.8%, following a contraction in the economy earlier this year due to a surge in imports before tariffs. Federal Reserve officials stated that they are waiting for clearer signals on the economic impact of Trump's policies. It is widely expected that the Fed will keep interest rates unchanged this week. Policymakers will also release new economic forecasts for the first time since Trump announced his comprehensive tariff "D-Day" plan on April 2nd.