U.S. retail sales fell in May, as consumers pulled back on auto purchases and spent less at gas stations due to falling fuel prices. But a closer look at the data shows continued strength in several core spending categories, underscoring the unusual dynamics created by shifting tariffs, falling inflation, and front-loaded demand earlier in the spring.
The Commerce Department reported Tuesday that retail and food service sales declined 0.9 percent in May from the previous month, the sharpest drop since January. April’s data were revised slightly downward to show a 0.1 percent dip.
Yet the most closely watched measure of retail spending—the so-called control group that feeds directly into GDP calculations—rose 0.4 percent in May, a stronger-than-expected gain. This measure strips out autos, gasoline, restaurants, and building materials to provide a clearer signal of consumer demand for goods.
The decline in May headline sales was driven primarily by a 3.5 percent plunge in motor vehicle and parts sales, which had surged earlier in the year. Many analysts attributed the earlier spike in auto purchases to tariff front-running: buyers and dealerships moved quickly in March and April to lock in prices ahead of President Donald Trump’s proposed tariff increases. That advance spending likely pulled some demand out of May.
Sales at gasoline stations fell 2.2 percent, reflecting lower fuel prices—not weaker consumption. According to the Bureau of Labor Statistics, gasoline prices dropped 3.0 percent in May, helping to offset inflation in other categories. The overall Consumer Price Index rose just 0.1 percent for the month, and core inflation was similarly soft, pointing to continued disinflationary pressure across the economy.
The other notable weak spot in the report was restaurants and bars, where sales fell 0.9 percent, the steepest decline in over two years. That category has been sensitive to both price shifts and consumer confidence, though it remains up 4.4 percent year-over-year, roughly in line with inflation.
Other areas showed surprising resilience. Furniture and home furnishings sales rose 1.2 percent, bouncing back from a soft April and reflecting continued demand for big-ticket goods. Clothing and accessories climbed 0.8 percent, while nonstore retailers—a category that includes e-commerce—grew 0.9 percent, continuing a strong upward trend.
Health and personal care stores rose 0.5 percent, and general merchandise stores posted a modest 0.3 percent increase. These gains helped lift the control group, which is now up 2.9 percent over the past three months, an encouraging sign for second-quarter growth.
The broader trend remains strong. On a year-to-date basis, nearly all major categories are up solidly from the same period last year. Auto sales are up 6.5 percent year-to-date, despite the sharp May drop. Online retail, clothing, and furniture all show year-to-date growth in the 5 to 7 percent range, while categories like general merchandise and health care have also gained steadily. Only electronics and building materials are slightly down compared to last year, reflecting longer-term headwinds unrelated to trade.
The three-month rolling average confirms the strength of this rebound. Retail sales excluding autos and gasoline—a proxy for core discretionary spending—have grown at an annualized pace of over 5 percent in the past three months. That pace of growth, especially when paired with tame inflation, signals that real consumer demand is not only stable but expanding.
Taken together, the May report presents a whipsawed picture of U.S. consumer behavior, shaped more by external timing factors than by a clear directional shift in demand. The strength in inflation-adjusted core spending suggests that households are still willing to spend—especially in discretionary categories—despite higher interest rates and ongoing uncertainty around trade policy.
The Federal Reserve meets this week to update its economic projections and policy outlook. With consumer prices cooling and core spending holding steady, the central bank is widely expected to keep rates unchanged while assessing the impact of President Trump’s recent tariff actions.
Real retail sales growth remains broadly positive on a year-over-year basis, particularly in categories like autos, furniture, and online retail, where inflation-adjusted volumes have increased. While trade policy continues to inject volatility into month-to-month spending data, the May report suggests that the underlying consumer engine remains intact.
