Essential buys remained steady; Electronics & Appliances and Building & Garden Supplies saw MoM declines
By Jonathan Silver, CEO of Affinity Solutions
As summer heats up, we’re taking a look back at May retail spending to determine whether we might face summer storms or sunny skies. The answer, according to the CNBC/NRF Retail Monitor, powered by Affinity Solutions, may not be so simple.
Total retail sales grew 4.44% year-over-year (YoY) and 0.49% month-over-month (MoM) in May, while core retail sales (excluding auto, gas, and restaurants) increased 4.2% YoY and 0.23% MoM.
These results suggest the pre-tariff boost in consumer demand is receding, particularly in affected categories like Electronics & Appliances. Unlike April’s 2.8% month-over-month (MoM) increase—likely driven by expected price hikes on smartphones, gaming, and home entertainment—May saw a 1.98% decline in this category.
The overall growth of retail sales is encouraging, but with continuing economic uncertainty, consumer spending will continue to shift. Consumer confidence weakened in May, hiring slowed, and inflation ticked up a bit. None of these economic factors are significant on their own, but collectively they may signal some unpredictability ahead.
Closely monitoring spending behavior over the next several months will be crucial for retailers seeking to stay ahead.
Essential Buys Remain Steady
Consumers continued to prioritize essential goods over discretionary items in May, driven by ongoing concerns about tariffs and inflation. This trend was evident in strong YoY growth for necessities: Grocery & Beverage sales rose 4.53% (with a 0.46% MoM increase), and Health & Personal Care sales climbed 3.85% (with a slight 0.06% MoM gain).
While people are still buying grocery staples, they are likely seeking better value by opting for cheaper brands (including generic and store brands), shopping at discount stores, and cooking more budget-friendly meals at home. They may also be doing less grocery stockpiling, preferring to buy only what they need. Interestingly, restaurants also showed growth both YoY (5.47%) and MoM (1.66%).
To navigate these competitive categories, retailers should carefully weigh the trade-offs between immediate revenue and building enduring customer relationships. Accepting the short-term squeeze of maintaining current prices despite escalating product costs, could be key to securing long-term gains in customer loyalty and wallet share. With shaky consumer confidence, premature or excessive price increases may alienate customers and send them to competitors.
The Early Bird Gets the Backpack
In May, Clothing & Accessories sales rose 3.21% YoY and 0.67% MoM. The modest gains are promising as we head into the summer months and look ahead to early back-to-school (BTS) shopping. Although tariffs continue to drive consumer concerns, a recent PwC report noted that almost three-fourths of U.S. families expect to spend an equal amount, or slightly more, on BTS shopping this year compared to 2024.
Additionally, retailers like Target, Walmart and Kohl’s are looking to launch early back-to-school promotions to compete with Amazon’s July Prime Day. To meet continuing consumer demand for value, these early promotions can help those retailers capture sales preemptively before budgets become constrained. Retailers will benefit from continuing to focus on value-for-your-money messaging and aligning their seasonal markdowns and promotions with shifting demand.
This is a critical time to watch how shoppers behave now, offering early signals and strategic insights into fall and holiday spending.
Home Upgrades Hit Pause
After a strong early spring performance, home and garden retail sales decreased in May. Building & Garden Supplies dropped 7.31% YoY and 2.3% MoM, and the Furniture & Home Furnishings category dipped just 0.1% YoY and 0.24% MoM, signaling that consumers continue to pull back on big-ticket discretionary home purchases.
We’ve noted before that sales of home furnishings are a key bellwether for the broader economy. Spend in this category will be telling as we predict how the reality of tariffs will influence consumer spending.
For retailers in these categories, this slowdown isn’t necessarily a cause for alarm– it’s a chance to re-focus on capturing and retaining market share. Leaning into financing options, bundling smaller upgrades with bigger purchases, and highlighting energy-efficient and long-lasting products could attract cautious consumers.
Preparing for a Summer of Change as Consumer Spend Rebalances
Though tariff-fueled purchases seemed to have paused in May, and shoppers continued to prioritize purchases of essentials, retailers should be ready for a summer of shifting demand with an eye on pricing and merchandising. Monitoring consumer behavior through real-time consumer insights will help retailers plan strategically and be ready to adapt quickly.
