[America] U.S. retail sales fell by 0.9% in May, below market expectations, recording a decrease in sales for two consecutive months | A clear explanation of important economic indicators in Japan and America | Manekuri, a media outlet providing investment information and financial tips from Monex Securities.

Announcement on June 17, 2025 (Tuesday) at 21:30 (Japan time)

U.S. Retail Sales

【1】Results: Overall, the core fell short of market expectations, while the control group maintained its resilience.

Retail Sales (Month-on-Month)

Result: -0.9% Forecast: -0.6%

Previous: -0.1% (revised down from preliminary figure +0.1%)

Core retail sales excluding automobiles and parts (month-on-month)

Result: -0.3% Expected: +0.2%

Previous: +0.0% (revised down from preliminary +0.1%)

Control group (retail sales excluding automobiles, gasoline, dining out, and construction materials - month-on-month)

Result: +0.4% Forecast: +0.3%

Previous -0.1% (revised upward from preliminary value -0.2%)

[Figure 1] Trends in US Retail Sales Source: U.S. Department of Commerce, created by Monex Securities from Bloomberg In the United States, personal consumption accounts for about 70% of GDP, which draws attention to retail sales figures that can confirm this trend.

In May, retail sales decreased by 0.9% compared to the previous month, falling short of market expectations (-0.6%) and marking a decline in sales for two consecutive months.

In addition, automobile sales experience significant monthly fluctuations due to factors such as sales events, which draws attention to retail sales excluding automobiles. The result was a decrease of 0.3% compared to the previous month, which also fell short of market expectations (-0.2%). However, since the decrease is milder compared to overall retail sales, it indicates that there was a substantial decline in automobiles in May (as detailed later).

On the other hand, the control group (core retail sales excluding automobiles, gasoline, dining out, and construction materials, which are subject to significant seasonal fluctuations) used indirectly in the calculation of GDP rose by 0.4% compared to the previous month, surpassing market expectations of 0.3%, and showed a recovery from the previous month (-0.1%).

In light of the results, the Atlanta Fed's GDPNow (short-term forecasting model) has revised its estimate for the real GDP growth rate (seasonally adjusted annual rate) for the second quarter of 2025 down from +3.8% to +3.5%.

*This revision also reflects the results of the industrial production index and the import price index announced on the same day.

【2】Content and Highlights: A significant decrease in automobiles due to the backlash from last-minute demand.

As shown in Chart 2, retail sales by item in May decreased for 7 out of 13 items.

[Figure 2] Retail Sales by Item (Month-on-Month) Source: U.S. Department of Commerce, created by Monex Securities from Bloomberg This time, the most notable decrease in sales was seen in automobiles and parts (-3.5%), construction materials (-2.7%), and gas stations (-2.0%).

Among them, the automotive and its parts saw a significant decline since June 2024. Due to the high-value nature of automobile transactions, consumers are sensitive to movements in tariffs, and while there was a surge in demand before the introduction of tariffs in March, the rebound decrease was prominently observed in May. Since automotive and its parts account for about 20% of total sales, the overall trend also follows a similar pattern around the introduction of tariffs in April (see Figure 3).

[Figure 3] Month-on-month changes in tariffs before and after for automobiles, their parts, and overall retail. Source: U.S. Department of Commerce, created by Monex Securities from Bloomberg In addition, the only service expenditure item among retail sales items, dining out, was also weak at -0.9% compared to the previous month. The decline in dining out sales indirectly implies a reduced need for workers providing face-to-face services, raising concerns about a decrease in labor demand in some industries (cooling of the labor market).

On the other hand, items classified as relatively discretionary spending, such as miscellaneous goods (+2.9%), hobbies like sports equipment (+1.3%), and furniture (+1.2%), showed steady progress.

In addition, non-store retail is performing well with a month-on-month increase of +0.9%, supporting the overall economy. Supported by strong non-store retail, the control group representing the underlying consumption trends in the United States (retail sales excluding automobiles, gasoline, dining out, and building materials) is maintaining its resilience (see Chart 4).

However, the trend seems to be turning downward, and whether this trend will break below in the future may become a key factor influencing the direction of the U.S. economy.

[Figure 4] Transition of the control group and contribution analysis Source: U.S. Department of Commerce, created by Monex Securities from Bloomberg

【3】Impressions: A temporary reactionary decline or a sign of a full-scale consumption slowdown, a challenge for monetary policy

In May, U.S. retail sales saw a significant decline, particularly in automobiles and auto parts. As mentioned earlier, this is largely considered a temporary factor due to a reactionary decrease from the rush demand before the imposition of tariffs. Additionally, the "control group," which indicates the underlying consumption trends, remains robust, and at this point, it cannot be said that U.S. personal consumption as a whole has collapsed significantly. It will be necessary to avoid overreacting to single-month data and to closely monitor future trends to determine whether there are changes in the trend.

That said, the fact that signs of a slowdown in personal consumption have begun to appear, as seen this time, raises concerns about the future sustainability of personal consumption, which has supported the US economy. Of particular note is the point that signs of a slowdown in consumption have emerged at a stage where the impact of tariffs has not yet fully manifested in prices.

In fact, inflation indicators such as the CPI (Consumer Price Index) have been slowing recently, and inflation has stabilized to a certain extent, but the increase in costs due to tariffs is expected to be reflected in the future with a time lag. Jack Kleinhenz of the National Retail Federation (NRF) also points out that "tariff-related inflation will materialize in the second half of 2025."

If in the future, the impact of tariffs spreads to consumer prices, there is a risk that household real purchasing power will decline, further intensifying the downward pressure on consumption.

If consumers cannot keep up with price increases, companies will need to absorb tariff costs through corporate efforts instead of raising prices. In this case, it is assumed that companies will respond to deteriorating profits by cutting personnel, raising concerns about worsening employment. This deterioration in employment could lead to a decline in consumption, which, if it becomes a negative spiral, may lead to a recession.

In this context, the timing of interest rate cuts becomes very important, but it is difficult to read when the effects of tariffs will become apparent, and the high level of uncertainty makes it challenging to make judgments on monetary policy. Attention will be focused on the remarks of Chairman Powell during the press conference scheduled after the FOMC (Federal Open Market Committee) on June 18.

Financial Intelligence Department, Kōsuke Oka