Shoppers are taking the trade war in stride — so far.
But fashion is still holding its breath as economists and industry experts project more uncertainty and higher prices headed into the second half.
Apparel and accessories specialty stores saw May sales increase 3.7 percent from a year earlier, slightly slower then the trend so far this year, which has pushed sales up 3.9 percent over the past five months.
And consumers continue to lean into e-commerce overall, with nonstore retailers seeing an 8.3 percent sales increase last month.
Total retail and food service sales in May rose 3.3 percent from a year earlier.
But compared with April, seasonally adjusted sales fell 0.9 percent. While that was worse than the 0.7 percent month-to-month decline economists predicted, according to FactSet, the weakness was only partially attributed to U.S. President Donald Trump’s trade war, which prompted car buyers in particular to buy right away.
Stephen Stanley, chief U.S. economist at Santander, said May’s sales decline was “consistent with garden variety weakness” and not trade induced.
Most of Trump’s dramatic “Liberation Day” tariffs were paused this spring and Washington has been working on deals with China, Brussels and more, but the start and stop of the levies and the fog of the trade war has disrupted business at the ports and more.
That makes it harder to gauge just what comes next.
Retailers — an optimistic bunch by nature — have a habit of pinning their hopes on the second half, believing that back-to-school, cooler weather and Christmas will make the year.
But this year nothing good seems to be on the way as businesses and producers around the world gird for some sticker shock at the very least.
“I remain highly confident that a tariff-related wave of price hikes is coming and that such a development will lead to a period of consumer weakness,” Stanley said.
The Consumer Price Index showed only a 0.1 percent increase in seasonally adjusted prices last month.
“Price hikes associated with tariffs are coming, most likely in June and July,” Stanley said. “When they do, I would look for consumers to pare back temporarily, so I continue to anticipate relatively soft consumer spending figures in the summer.”
Neil Saunders, managing director of GlobalData, called spending in the quarter “respectable,” with only “small pockets of accelerating prices.”
“That may well change as the course of the year progresses and as inventory affected by tariffs starts to appear on shelves,” Sanders said.
“All in all, the numbers demonstrate the underlying resilience of the consumer even in the face of economic uncertainty,” he said. “The truth is that during May, consumer finances did not deteriorate significantly, and there was some relief from lower gas prices. So the ability to spend remained largely intact.”
Matthew Shay, president and chief executive officer of the National Retail Federation, said: “While momentum remains, the nature of consumer spending is shifting as economic uncertainty increases. Consumer fundamentals haven’t been damaged yet, and a slowing-but-still-growing job market is supporting household priorities ahead of any meaningful price increases in the coming months.”
