Advance "running ahead" but lacking momentum? U.S. retail sales in May may see a significant decline

Due to consumers shopping in advance to avoid potential price increases from tariffs, U.S. retail sales in May may see a significant decline. Economists expect that American consumers slowed their use of credit and debit cards during the month, leading to a cooling of overall consumption enthusiasm. According to a survey by FactSet, U.S. retail sales in May are expected to decrease by 0.7% month-on-month, compared to a mere 0.1% increase in April, making this decline particularly noticeable. Sam Tombs, an economist at Pantheon Macroeconomics, predicts that the drop in retail sales in May could reach 1%, which, if realized, would be the largest monthly decline since March 2023. The U.S. Census Bureau will release the latest preliminary monthly data on retail and food service sales on Tuesday at 8:30 AM, and investors are closely monitoring this. The decline in gasoline prices has led to reduced sales at gas stations, which is considered one of the main drivers of the overall retail sales decline. Additionally, spending on automobiles and home improvement supplies is also expected to weaken. Excluding automobiles, retail sales in May are expected to increase by 0.1% month-on-month; meanwhile, the Chicago Fed's "Retail Trade Leading Indicator Model" estimates this growth at 0.3%, seasonally adjusted. The "core retail sales data" (which excludes automobiles, gasoline, building materials, and food services) is expected to rise by 0.2% compared to April, and this data is significant for GDP calculations. Data compiled by Bank of America shows that total household spending in May increased by 0.8% year-on-year, slightly lower than April's 1%. However, on a seasonally adjusted basis, month-on-month spending decreased by 0.7%. In terms of specific categories, restaurant spending remained stable, with slight increases in accommodation and airfare spending; however, spending on home improvement, gasoline, and groceries saw the largest declines. Despite the significant weakness in month-on-month spending growth in May, Aditya Bhave, an economist in the global research department at Bank of America, pointed out that the Census Bureau's seasonal adjustment model takes into account factors such as holidays, the number of days in the month, and consumption patterns, which may mitigate some of the data decline's impact. Tombs added, "Overall retail consumption remains relatively robust, aside from a few categories, partly because consumers have not yet truly felt the large-scale price increases related to tariffs. However, as price pressures intensify in the coming months, post-tax real income is squeezed, and the job market weakens, real consumer spending will inevitably face more challenges."