Retail Sales Drop Sharply as Tariff Surge Fades

The U.S. retail sector experienced its biggest sales decline since January when consumers reduced their purchases because of upcoming tariffs. The Commerce Department reported that sales decreased by 0.9% after they revised April's numbers downward.

The decline in sales was primarily caused by auto purchases because consumers accelerated their large-ticket purchases before April's new tariffs began. Service station receipts decreased because of lower gasoline prices.

The data release before the Federal Reserve policy meeting indicates that domestic demand shows signs of slowing down. The Federal Reserve maintains its interest rates between 4.25% and 4.50% while assessing the risks from Middle East tensions and Trump's extensive tariff strategy.

Michael Pearce from Oxford Economics stated that tariffs affect when people spend their money but have not caused a general decrease in spending. The economic growth rate will decrease according to economists because real disposable income faces declining pressure.

The dollar rose in value against major currencies while Treasury yields decreased. The 25% tariff on imported vehicles has intensified concerns about reduced consumer spending during the second half of the year.