US Retail Sales Decline for Second Consecutive Month, Indicating Cautious Consumer Spending

Retail sales in the United States dropped for the second month in a row in May, reflecting a possible reduction in consumer confidence amid ongoing trade tensions and concerns about personal finances. After an early-year surge in spending, Americans appear to be pulling back as inflation remains subdued and tariffs continue to influence costs.

Inflation Remains Under Control Despite Tariffs

Initial fears predicted that tariffs would trigger a sharp rise in consumer prices, potentially leading to an inflation crisis. However, the latest data shows consumer prices increased just 2.4% year-over-year in May, slightly higher than April’s 2.3%, which marked the lowest inflation rate since February 2021. Core inflation, which excludes volatile items like food and gas, declined to 2.5% in April, setting a low mark since March 2021.

Despite a significant increase in tariffs — with the effective rate rising from 2.3% last year to 14.1% in 2025 — inflation has remained relatively tame, contradicting widespread expectations of sharp price hikes. Retailers are largely still selling through inventories purchased before the tariffs took effect, tempering immediate price increases.

Limited Price Hikes in Key Sectors

Analysis from firms tracking consumer prices indicates minimal recent price increases. For example, only 19 of 80 monitored products have gained in price since mid-April, with most remaining steady or falling. Similarly, auto prices have dropped slightly, with new vehicles falling 0.2% in May and prices of both new and used cars decreasing, as dealerships are liquidating pre-tariff stock.

The Outlook and Business Impact

Experts warn that the current low inflation period may be temporary, with many predicting upcoming price increases as inventories deplete and tariffs fully propagate through supply chains. Major retailers plan to raise some prices later this year, particularly in categories affected by tariffs, though they aim to limit these hikes initially.

Small and mid-sized businesses, less equipped to absorb rising costs, face heightened vulnerability, potentially leading to supply cuts or price hikes that could ripple through the economy. Analysts anticipate that inflationary pressures may intensify toward late summer or early fall, once stockpiles of pre-tariff goods are exhausted.

Overall, while consumer prices have remained stable so far, the economic landscape suggests that inflation could accelerate as the effects of tariffs permeate the market.