U.S. retail sales for May are expected to post a sharp monthly decline, potentially reinforcing concerns that tariff headlines and economic uncertainty are starting to pinch consumer spending.

That would mark the second monthly drop in 2025 after January's 0.9% plunge. Monthly declines in retail sales have been rare over the past two years, with only five months showing negative prints.

A fresh pullback—particularly at the start of the second quarter, following an already negative first quarter—could signal that deeper cracks are forming in the U.S. consumer landscape.

Retail Sales Look Weak Again—Here's What's Coming

The median Wall Street economist expects the Bureau of Economic Analysis to report a 0.7% decline in May retail sales Tuesday morning at 8:30 a.m. ET.

Bank of America is calling for a 0.6% drop. More importantly, they expect the "control group," the slice of sales that actually matters for GDP calculations, to come in flat.

"We expect a soft retail sales report for May," said Adhyta Bhave, economist at Bank of America, in a report last week.

Bank of America's internal credit card data shows that spending was particularly weak in areas like home improvement, groceries and general merchandise.

“Total card spending per household dropped 0.7% month-over-month on a seasonally adjusted basis,” the investment bank stated.

“If our forecast of a flat print on retail sales ex-autos in May proves correct, the 3-month average growth rate would tick down,” Bhave said.

Are Tariffs To Blame?

The weakness in consumer spending follows a turbulent period in U.S. trade policy, but Bank of America data suggests that the average household didn't significantly alter its behavior in response to key events—such as the April 2 tariff announcement or the partial trade deal with China on May 12.

The picture changes when looking at high-income households. Wealthier Americans appeared far more responsive to trade developments, particularly when it came to electronics.

“Electronics have been very sensitive to the news… We find that the top 5% and top 1% income cohorts increased their online electronics purchases immediately after the April 9 escalation of China tariffs, likely to get ahead of the tariffs,” Bhave said.

That pattern repeated among the top 1% following the May 12 U.S.-China agreement.

Could The Market React Like It Did in February?

Back in mid-February, a weak January retail report helped spark a nasty sell-off.

The S&P 500 lost 0.4% the week January’s retail data came out and shed 7.8% over the next month. At the time, fears of a recession were back on the table, fueled by President Donald Trump's tough talks on trade.

Both consumer and tech stocks entered a period of weakness. The Consumer Discretionary Select Sector SPDR Fund ( XLY ) fell 14% over that 30-day stretch following Feb. 14. The Technology Select Sector SPDR Fund wasn't spared either, losing 10%.

So… Will It Happen Again?

Maybe not. There are three things working in the market's favor right now.

First, Trump has since put a 90-day pause on reciprocal tariffs, which has taken some of the heat out of trade fears.

Second, inflation is cooling. Two softer-than-expected CPI reports last week bolstered investor bets on the Fed cutting rates later this year.

Third, on Monday, the geopolitical front took a positive turn. Iran reportedly signaled a desire for de-escalation in fighting with Israel and expressed openness to renegotiating a nuclear deal with the United States. This development pushed oil prices lower, easing energy cost concerns while boosting investor appetite for riskier assets.

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