Resilient Retail Sales Defy Tariff Slump Expectations
Retail sales have remained resilient over the summer, defying expectations that spending would recede in response to tariffs. A pullback in consumer spending appeared to be materializing in April and May, but core retail sales finished June up 0.6% month-over-month and up 4.1% year-over-year, according to a Marcus & Millichap analysis.
“This expectations-exceeding performance suggests that despite concerns surrounding tariffs, overall consumer health remains steadfast,” the report noted.
Households continue to prioritize spending at necessity-based stores and restaurants, both of which are less impacted by new tariffs than other sectors. Dining out remains a priority for consumers, as spending at restaurants and bars reached a record high in June, up 6.6% year-over-year.
Retail segments more exposed to tariffs recorded monthly declines in June, as prices on big-ticket items like appliances and furniture rose by between 1% and 1.9%, according to the report. Department stores that sell these items saw sales drop 3.1% monthly as consumers shifted to miscellaneous and general merchandise stores where discounts are more available.
“This behavior is motivating off-price retailer expansion that is supporting the backfilling of recently vacated big-box space,” Marcus & Millichap said.
The firm is watching travel spending as some consumers scale back due to financial concerns. Flying domestically and traveling internationally may take a back seat to road trips, which would benefit quick-service chains and restaurants near major interstates and tourist destinations, according to Marcus & Millichap.
Meanwhile, online spending increased 4.5% in June, which the report said points to deal-searching in non-store venues. The continued growth of the online segment will drive demand for warehouses and distribution properties.
Consumer sentiment could be further buoyed by provisions in the recently passed One Big Beautiful Bill Act, which provides modest tax relief for most households by raising the standard deduction and increasing the child tax credit.
“These enhancements should bolster household budgets, particularly for lower- and middle-income earning households juggling debt or experiencing financial strain,” the report predicts.
Source: GlobeSt/ALM