The May US retail sales report showed a soft consumer in the early months of the second quarter of 2025. In May, overall retail sales were down -0.9% MoM, coming in weaker than the expected drop of -0.7% MoM. In addition to the weak May print, the Census Bureau revised down the slight April gain of 0.1% MoM to a slight decline of -0.1% MoM. The drop in the headline sales total was caused by large declines in the auto & parts and gas segments which were down -3.5% MoM and -2.0% MoM, respectively. While both data points look weak, they were not necessarily a result of consumer weakness.

• Auto sales had surged at the end of Q1 2025 due to consumers front running tariffs, and the decline in May is a result of that force dissipating. On an annual basis, sales are still up 2.5% YoY, and sales in the last three months are still up 6.7% over the same three month period last year.
• Gas sales continue to be affected by weak gas prices. In the May CPI report, the gasoline CPI index fell -2.6% MoM suggesting that all of the -2.0% MoM decline in gas sales could be attributed to the effects of prices. Indeed, gas prices have yet to see their typical seasonal rise so May retail gas station sales are down -6.9 YoY (the same annual comparison as April).

Excluding auto and gas sales, May retail sales were only down -0.1% MoM and, on an annual basis, were up 4.6% MoM. The segments counted in this total were mixed, but the larger categories dropped while the gains were seen in the smaller categories. For example, two of the larger core segments, food & drinking places (-0.9% MoM) and food & beverages (-0.7% MoM), saw significant declines which were only partly offset by rises in furniture (+1.2% MoM), sporting goods (+1.3% MoM), and miscellaneous sales (+2.9% MoM). Non-store sales was the only major retail segment that posted a significant gain, up 0.9% MoM. Overall, the core segments negate some of the pessimistic sentiment elicited by the headline move, but generally consumption continues to get gradually softer.