U.S. retail sales growth slowed in April, showing signs of weak consumer spending

According to Zhitong Finance APP, retail sales in the United States saw a significant slowdown in April, indicating that consumers reduced spending on automobiles, sporting goods, and other categories of imported goods amid concerns about rising prices due to tariffs. Data released by the U.S. Department of Commerce on Thursday showed that U.S. retail sales growth in April fell sharply to 0.1% month-on-month, revised from a previous value of 1.7%, but above the expected flat reading. U.S. retail sales (excluding automobiles) grew 0.1% month-on-month in April, below the expected 0.3%, with the previous value adjusted to 0.8%.

Among the 13 categories reported, 7 categories experienced declines. After a surge in car purchases last month, automobile sales saw a slight decrease. As the only service sector category in the retail report, spending at restaurants and bars saw strong growth for the second consecutive month.

Before President Trump's tariffs were imposed, American consumers engaged in significant preemptive shopping, and the data's decline after strong growth in March indicates that consumers are cutting back on spending, which will heighten concerns about slowing economic growth. With consumer confidence deteriorating, businesses, investors, and economists are taking a cautious stance on the outlook. Earlier this week, the U.S. and China reached a temporary agreement to ease the trade war, which somewhat alleviated concerns about U.S. consumer spending and the overall economic outlook. However, Trump warned that these tariffs could spike again, and forecasters indicated that these tariffs would still drive up inflation and weaken economic growth.

Retail data showed that the so-called control group sales fell by 0.2% in April, indicating a weak start for the economy in the second quarter. Control group sales are an important indicator of consumer spending used by the government to calculate Gross Domestic Product (GDP). This measure excludes sales from food services, automobile dealers, building material stores, and gas stations.

Before the release of this data, the Atlanta Fed's GDPNow model predicted that the U.S. economy would grow by 2.3% in the second quarter, marking a significant rebound from the contraction experienced earlier this year due to a surge in imports ahead of tariffs. This estimate will change as more economic data is released in the coming weeks Federal Reserve officials remain uncertain about how tariffs will ultimately affect the economy and plan to keep interest rates unchanged for the foreseeable future. Policymakers indicated that they are more inclined to control inflation rather than preemptively cut rates. According to the CME FedWatch Tool, the market currently expects the Federal Reserve to cut rates twice this year, with the earliest cut possibly starting in September, with a probability of about 51%.

So far, tariffs have not triggered inflation. In April, the Consumer Price Index (CPI) rose less than expected for the third consecutive month, indicating that businesses are not in a hurry to pass on the costs of higher tariffs to consumers. The decline in prices for services such as airline tickets and hotels also suggests a pullback in discretionary spending. Nevertheless, another report released on Thursday showed that producer prices unexpectedly fell by the largest amount in five years in April, largely reflecting a decline in profit margins, indicating that businesses are absorbing some of the impact of tariff increases.

However, Walmart (WMT.US), the "barometer of American consumer spending," reported robust quarterly sales earlier on Thursday but indicated that tariffs and escalating economic turmoil mean that the world's largest retailer expects to raise some prices starting this month. The company stated, "In today's dynamic operating environment, the lack of clarity makes short-term forecasting extremely difficult."

Energizer Holdings CEO Mark LaVigne stated, "The weakening of consumer confidence and persistent inflation across goods may put pressure on sales in the short term... When we consider all these factors—tariffs, consumer confidence, and overall demand—we have adjusted our outlook for the remainder of the year."

Nu Skin Enterprises Inc. CEO Ryan Napierski mentioned during the earnings call on May 8, "Overall, we continue to face macroeconomic pressures, as consumer purchasing behavior for premium beauty and wellness products remains cautious amid the uncertainty of the potential impact of tariffs on inflation and the dampening of global consumer confidence."

Texas Roadhouse CEO Gerald Morgan expressed, "There are still concerns. We have questions about some of the things happening. But I think, overall, our restaurants are packed."

Retail sales data is not adjusted for inflation and primarily reflects purchases of goods, which constitute a relatively small portion of total consumer spending. Inflation-adjusted data for goods and services spending in April will be released later this month