New economic data suggests the turmoil surrounding tariffs is affecting U.S. consumer spending. Retail sales in the U.S. dropped 0.9% in May, a sharp dip from the 0.1% decline the month before. Kelly O'Grady takes a look at the numbers.

New York

Donald Trump has signed an order to impose tariffs imports into the U.S. from countries including China, Mexico and Canada.

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Recent economic data indicates that US retail sales fell by 0.9%, a sharper decline compared to the previous month's 0.1% drop. Analysts attribute this downturn to the ongoing effects of tariff-related uncertainty, which has led consumers to pull back on spending, particularly in sectors such as automobiles and restaurants.

Despite a slight rebound in consumer sentiment, concerns about inflation and the broader economy persist. Homebuilder confidence has also reached a two-year low, driven by rising material costs and higher interest rates, which are discouraging both builders and potential homebuyers. The Federal Reserve is expected to address these issues in upcoming policy discussions, with attention focused on possible interest rate adjustments.

New data signals tariff turmoil's effect on consumer spending

New economic data released today suggests the turmoil surrounding tariffs is affecting U.S. consumer spending. Retail sales in the U.S. dropped 0.9 percent in May, a sharp dip from the 0.1 percent decline the month before. For tonight's interview, we're joined by Money Watch correspondent Kelly O'Grady. So Kelly, let's start off. What do you make of that change in retail sales? Well, what it tells me is we are seeing a bit of consumer pullback, and we've been kind of wondering when that's going to happen, but two things really stood out to me. Part of the drop is a shift in timing. We talked about auto sales, for example, a lot, John, that people went out and they bought cars ahead of that tariff deadline kicking in, and so now in May, you saw auto sales take a hit. The other part of it, though, is really an indication that we have a more cautious consumer, and what stuck out to me was bars and restaurants. We saw a 0.9 percent dip. People need to eat, but they don't need to eat out, and you are seeing people make some of those tradeoffs and be more choosy with their money. Right, and they weren't stocking up on bars and restaurants in the past months. What do you make, though, of then the consumer sentiment number, which was a little bit better than people – than it had been, certainly? Yeah, we saw actually consumer sentiment rebound, and so then the fact that you saw the retail sales dip, I think it's kind of the delay people were making those decisions about what they were going to spend in May, back a couple months ago, when they didn't feel as good about the economy. But that being said, just because consumer sentiment rebounded, it doesn't mean that we are totally out of the clear – or rather, back in the clear. We do see people in that survey, they're worried about inflation, they're worried about the economy, so we're in a slightly better situation, but we're not out of the woods. The other person in Washington, which is where you are, who has to figure this out, other than you, is the Federal Reserve chairman. That's why you're down there. How do you think they see all of this data? Well, spoiler alert, John, I don't think we're going to get an interest rate cut tomorrow, but I think that the two biggest things that we're going to be talking about in that press conference tomorrow, right, that's always the big thing, what is Chair Powell going to say? I mean, one is how many interest rate cuts are we going to get because of this pullback in consumer spending that we're seeing, but also the concern about higher inflation. Remember, we're looking at two right now, we're going to get an updated projection on that tomorrow. And then the other thing that's really going to be a big sort of backdrop to this is the push from President Trump to cut interest rates. He's been very vocal. You know I'm going to try and press Chair Powell in that room tomorrow. He doesn't say much, but sometimes he can be a little spicy in his response, so we're going to be looking for that. I also want to ask you about the home builder confidence number, two-year low. What do you make of that? People are concerned about cost of materials going up to build homes, and they're also seeing home buyers pull back because of those higher interest rates. They're saying, I'm going to rent, I'm not going to buy. But what this means is if you're a home builder and you're seeing, well, there isn't that demand, you're not going to build as many homes. And we have a supply problem in this country, John, and that's really going to impact things going forward. Kelly O'Grady in Washington, we'll be talking to you again tomorrow. Thanks again, Kelly.

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New data signals tariff turmoil's effect on consumer spending

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