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Tariff-Related Inflation Fears Kept Consumers Spending in April
Key Takeaways
A key indicator of the impact of tariffs on the economy isn’t flashing warning signs yet, as retail sales growth continued in April.
While slower than March’s surge , retail sales increased by 0.1% in April. The measure of sales at retail stores was in line with estimates of economists surveyed by The Wall Street Journal and Dow Jones Newswires . Last month’s sales growth figures were revised upward to reflect 1.7% growth, as shoppers rushed to purchase items ahead of potential U.S. tariffs.
“[April's 0.1% growth] is much more impressive than it sounds, as it means March's huge gains were maintained,” wrote Moody’s Economist Scott Hoyt.
Retail Sales in Focus Amid Tariff Tussle
Economists are watching retail sales as an important signal on whether consumer fears about President Donald Trump’s tariffs are making them hesitant to spend money.
So far, poor consumer sentiment surveys haven’t resulted in a meaningful decline in spending, mainly as people rush to buy items before tariffs raise prices. However, economists still expect a slowdown as tariffs work through the economy.
“Going forward, we anticipate further weakness in consumer spending as pay back from the front-loading of consumption ahead of the tariffs, higher tariff-induced prices, high borrowing rates, and a softening in employment gains that will weigh on aggregate income gains for households,” Nationwide Chief Economist Kathy Bostjancic said.
Consumer spending powers the economy, representing about two-thirds of the U.S. economy, with goods purchases making up about a third of spending levels. Retail sales, in particular, can illuminate tariffs’ impact on consumers because they reflect spending on goods like cars, building supplies, sporting goods, and toys. Many items tracked by the measure are manufactured in foreign countries and subjected to import taxes.
“The retail sales figures in the coming months take on additional importance as they serve as a harbinger of the impact of tariffs on the broader economy,” Wells Fargo economists wrote.
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