Americans cut back sharply on their spending last month amid tariffs

In May, the United States experienced a significant decline in retail sales, with a reported drop of 0.9% compared to the previous month, as indicated by the Commerce Department. This downturn marks the most notable monthly decrease since January and follows a downward revision of April's decline to 0.1%. The data, which is adjusted for seasonal variations but not for inflation, highlights a broader trend of reduced consumer spending. A primary factor contributing to this decline was a sharp decrease in automobile sales. When excluding vehicle purchases, the overall retail sales figures showed a more modest decline of 0.3%, suggesting that the drop in spending may be concentrated in specific sectors rather than a universal trend across all consumer goods.

The shift in consumer behavior can be traced back to a surge in spending earlier in the spring, as Americans rushed to purchase big-ticket items, particularly cars, in anticipation of impending tariffs proposed by President Donald Trump. This front-loading of purchases led to a spike in retail sales during March. However, the rapid decline in May indicates that consumers may now be experiencing a 'hangover' effect, as the initial frenzy has subsided and spending has significantly downshifted. This pattern raises questions about the sustainability of consumer spending in the wake of tariff-related pressures and the overall economic outlook as the situation continues to develop.