Growth in US retail sales decelerated notably in April, suggesting consumers pulled back spending on cars, sporting goods and other categories of imported goods amid concerns about rising prices from tariffs.
The value of retail purchases, not adjusted for inflation, increased 0.1% after a revised 1.7% gain in March, Commerce Department data showed Thursday. Excluding autos, sales also climbed slightly.
Seven of the report’s 13 categories posted decreases, also restrained by apparel — another good which is largely imported — as well as gasoline. Car sales declined slightly after a buying spree in the previous month. Spending at restaurants and bars, the only service-sector category in the retail report, rose firmly for a second month.
After loading up on purchases to front-run President Donald Trump’s tariffs, the figures suggest consumers are tempering their spending and will fuel concerns of weaker economic growth. Companies, investors and economists are cautious on the outlook as consumer sentiment sours.
Fears about the outlook for consumer spending and the economy at large were somewhat alleviated earlier this week when the US and China reached temporary agreement to de-escalate the trade war. However, Trump has warned those tariffs could soar again, and forecasters say that the levies will still boost inflation and dent growth.
The retail data showed so-called control-group sales — which feed into the government’s calculation of goods spending for gross domestic product — fell 0.2% in April, posing a weak start to the second quarter. The measure excludes food services, auto dealers, building materials stores and gasoline stations.
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Before the figures, the Atlanta Fed’s GDPNow forecast penciled in a 2.3% increase for the second quarter, which would mark a notable rebound from a contraction at the start of the year on a monumental pre-tariffs import surge. The estimate will change as more economic data are reported in coming weeks.
Fed Outlook
Federal Reserve officials are still uncertain as to how tariffs will ultimately impact the economy and are keeping interest rates on hold for the foreseeable future. Policymakers have indicated they’re more inclined to keep inflation in check rather than cut rates preemptively.
So far, the tariffs haven’t yet stoked inflation. Consumer prices rose by less than forecast in April for a third month, suggesting little urgency so far by companies to pass along the cost of higher tariffs to consumers. Falling prices for services like airfare and hotels also suggested a pullback in discretionary spending.
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Separate data out Thursday showed producer prices unexpectedly declined in April by the most in five years, largely reflecting a slump in margins, suggesting companies are absorbing some of the hit from higher tariffs.
Walmart Inc. posted solid quarterly sales earlier Thursday, but said that tariffs and increasing economic turbulence means even the world’s largest retailer expects to begin raising some prices this month.
“The lack of clarity that exists in today’s dynamic operating environment makes the very near-term exceedingly difficult to forecast,” the company said in a statement.
How Executives See It:
“Weakened consumer confidence and persistent inflation across the store may pressure volumes in the short-term... When we pull all of this together — tariffs, consumer confidence and overall demand — we have tempered our outlook over the remainder of the year.” — Mark LaVigne, CEO of Energizer Holdings Inc., said on the battery-maker’s May 6 earnings call
“Overall, we continue to experience macroeconomic pressures as consumers remain cautious in their purchasing behaviors for premium beauty and wellness products amid uncertainty around the potential impact of tariffs on inflation and driving down consumer sentiment around the world.” Ryan Napierski, CEO of Nu Skin Enterprises Inc., said on the personal-care product maker’s May 8 earnings call
“There’s still concerns. We all have questions about some of the things that are going on. But I think in general, our restaurants are packed full of people.” Gerald Morgan, CEO of Texas Roadhouse Inc., said on a May 8 earnings call
The retail sales figures aren’t adjusted for inflation and largely reflect purchases of goods, which comprise a relatively narrow share of overall consumer outlays. Inflation-adjusted spending data on goods and services for April will be released later this month.
