Kiplinger’s Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or to subscribe for the latest trends and forecasts from our highly experienced Kiplinger Letter team.
Retail and food service sales, excluding gasoline, dropped 0.8% in May. Motor vehicle sales came back to earth after surging ahead of new tariffs in March and April. There will likely be several slow months for car sales still to come. Excluding motor vehicles and gasoline, retail sales edged down 0.1%. Despite little change in the aggregate total, the components were a mixed bag: Furniture, clothing, sporting goods, miscellaneous items and ecommerce showed good gains, while electronics and appliances, building materials, groceries and restaurant sales dropped.
Restaurant sales declined 0.9% in May after strong growth in March and April. But it is common for this spending to retreat after a period of stronger than normal growth. Spending on services excluding dining rose a moderate 0.3% in April, its slowest growth in nearly two years. (April is the latest month for which services spending data other than dining are available. Data for other services in May will be published at the end of June.)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Despite the uncertainties caused by tariffs, overall sales are holding up reasonably well at the moment. But weakness may show up later. While price increases related to tariffs have been limited so far, a sharp rise in the household savings rate in April suggests that consumers are concerned. It is likely that price increases could become more prevalent later, as inventories of goods that were stockpiled ahead of the tariffs start to run down.
Consumer sentiment improved a bit in May but remains low because of the uncertainties regarding the White House’s tariff policy and prospects for the overall economy. Spending will also be affected by flattening income growth later because of the slowdown in hiring taking place now.
Finally, even if the unemployment rate does not rise much, just the fear of job losses will likely boost the household savings rate to 6%, from below 4% late last year. More saving means less spending on current consumption: a prudent move for individual consumers during times of uncertainty, but a headwind for the overall economy.
Related content
-
Cord Cutting Could Help You Save Over $10,000 in 10 YearsHow cutting the cord can save you money and how those savings can grow over time.
-
The '8-Year Rule of Social Security' — A Retirement RuleThe '8-Year Rule of Social Security' holds that it's best to be like Ike — Eisenhower, that is. The five-star General knew a thing or two about good timing.
-
Blue Collar Workers Add AI to Their ToolboxesThe Kiplinger Letter AI can’t fix a leak or install lighting, but more and more tradespeople are adopting artificial intelligence for back-office work and other tasks.
-
America's Surprising Strengths in Manufacturing and ExportsThe Kiplinger Letter Despite common perceptions that the U.S. doesn't build things anymore, American factories are still hard at work. A special report from The Kiplinger Letter.
-
Will State Laws Hurt AI’s Future?The Kiplinger Letter Republicans in Congress are considering a moratorium on state AI laws. But it’s likely a growing patchwork of state AI regulations will be here for a while.
-
AI Goes To SchoolThe Kiplinger Letter Artificial intelligence is rapidly heading to K-12 classrooms nationwide. Expect tech companies to cash in on the fast-emerging trend.
-
The New AI Agents Will Tackle Your To-Do ListThe Kiplinger Letter Autonomous AI agents “see” your computer screen, then complete a task, from buying a concert ticket to organizing email. This opens up a world of possibilities.
-
AI’s Medical RevolutionThe Kiplinger Letter Medicine is a field ripe for finding both exciting and practical uses for AI. The tech is already being used by doctors and researchers.
-
The Economic Impact of the US-China Trade WarThe Letter The US-China trade war will impact US consumers and business. The decoupling process could be messy.
-
AI Heads to WashingtonThe Kiplinger Letter There’s big opportunity for AI tools that analyze MRIs and other medical images. But also big challenges that clinicians and companies will have to overcome.
