Retail Sales (Census)

US retail and food services sales rose marginally by 0.1% in April 2025, following a sharp upward revision in March's gains from 1.5% to 1.7% (due to large downward benchmark revisions). The monthly increase was softer than expected, with retail trade sales dipping 0.1%. Core retail sales - which exclude autos, gasoline, building materials, and food services - fell 0.2% against expectations for a 0.3% monthly increase, suggesting weakening underlying demand. Sectors like sporting goods and miscellaneous retailers experienced notable declines, while food services and motor vehicles saw solid year-over-year gains. This slowdown comes amid tariff-related uncertainty and signs of faltering consumer confidence, as highlighted by falling wholesale prices for services and corporations like Walmart withholding financial guidance.

Interpretation

Even before getting to the April update on consumer spending, Census applied is annual benchmark revisions which saw unusually large decreases to each series. The differences weren’t uniform, though amounted to around 2%, far more than is typical.

The latest advance estimates on US retail and food services sales point to a sharp deceleration in consumer spending in April 2025. Retail sales rose just 0.1% month-over-month, a significant slowdown compared to the upwardly revised 1.7% increase in March. While the headline year-over-year gain of 5.2% suggests resilience, the soft monthly figure reveals underlying fragilities in consumer behavior, particularly when adjusted for recent distortions such as front-loaded purchases ahead of potential tariffs.

Indeed, the moderation appears directly linked to fading one-off factors. In March, consumers accelerated motor vehicle purchases, likely in anticipation of higher prices tied to the volatile tariff environment. That front-loading effect distorted the March surge, creating an artificially high base and setting the stage for a pullback in April, especially as trade tensions remain unresolved despite a 90-day truce between Washington and Beijing. In this context, the flat performance in auto sales (-0.1%) and sharp declines in discretionary segments like sporting goods (-2.5%) and miscellaneous retailers (-2.1%) reinforce concerns that consumers are becoming more cautious amid economic and policy uncertainty.

More troubling is the contraction in “core” retail sales, which strip out volatile categories like autos and food services. These sales fell 0.2% in April, reversing a 0.5% gain in March. Since core retail sales are a strong proxy for the consumer spending component of GDP, the decline raises red flags about the momentum of the broader economy in Q2. This is particularly disconcerting given that the economy contracted in Q1 for the first time in three years. A weakening core suggests that expectations for a robust rebound may be overly optimistic.

Moreover, corporate hesitation - evidenced by Walmart’s decision to refrain from issuing financial guidance - adds weight to the thesis that the consumer-driven U.S. economy is entering a more fragile phase. Falling wholesale prices in the service sector, including for airline tickets and hotel stays, further suggest ebbing demand.