US retail sales climb as consumer tariff impact remains minimal
US Retail Sales in July Show Moderate Growth Amid Tariff Uncertainty
July’s retail data reflected a modest 0.5 percent rise to $726.3 billion, matching forecasts as markets assess the impact of tariffs that have not yet significantly eroded consumer spending.
Key Drivers of July Retail Sales
- Motor vehicles and parts added 1.6 percent, bolstering overall sales.
- Furniture contributed additional gains.
- Declines in electronics and building materials offset the positive momentum.
Analyst Outlook for the Second Half of 2025
While the July report was solid, several analysts highlighted a risk of contraction in later retail sales. The softer growth trajectory appears intertwined with a weakening labor market and a likely downstream passage of tariff costs.
Consumer Spending and Sentiment Trends
Surveys point to a partial easing in consumer sentiment, a rebound following the early‑April tariff shock announced by President Trump. The University of Michigan survey indicated a rise in year‑ahead inflation expectations to 4.9 percent from 4.5 percent, and consumer sentiment in August fell to 58.6 points from 61.7 points in July.
Interpretation of Sentiment Data
The survey director Joanne Hsu noted that consumers are no longer bracing for the worst‑case scenario that was feared in April. However, expectations for both inflation and unemployment remain a concern.
Tariff Policy and Retail Response
Since the spring, President Trump has suspended many of the most onerous tariffs and has announced preliminary trade deals with major partners such as Japan and the European Union. Nonetheless, the overall tariff rate remains high by historical standards, even if it is lower than earlier threats.
New Tariff Levies
Trump announced plans to set tariffs “next week and the week after” on semiconductors and steel, reinforcing the evolving trade environment.
Dynamic Pricing Pressure
Earlier data showed a larger uptick in wholesale prices compared with consumer prices, warning that price pressures may soon be passed to consumers. Retailers have been absorbing lower profit margins and reducing costs elsewhere in anticipation of eventual offsetting.
Retailers’ Mitigation Strategy
- Auto dealers have seen sales rise 1.6 percent, reflecting a moderate spending rate.
- Consumers maintain a moderate pace of spending, with an uptick in the past two months as tariff‑price pass‑through has been limited thus far.
Future Risk Assessment
High Frequency Economics’s chief economist Carl Weinberg viewed July import price increases as “new evidence of price pressure building in the pipeline,” concluding that consumer spending is slowing.
As the year progresses, analysts anticipate that the interplay of tariff policy, labor market dynamics, and consumer sentiment will shape the trajectory of U.S. retail sales.
