Retail sales were essentially flat in April compared to March, according to data out Thursday from the Commerce Department — even as surveys showed consumers feeling more negative about the economy. That was after a decent jump upward in March.
There’s also a recent signal that price increases due to tariffs are coming to at least one major retailer: Walmart’s chief financial officer told NBC that the company will start hiking prices within a few weeks.
In other words, shaky consumers are about to collide with higher prices.
Here’s the thing about the American economy right now: A lot of indicators look pretty good. Unemployment is relatively low, wage growth is solid, inflation’s not too bad.
“We know that the high level macros are strong, but the consumer is not an endless well of money that you can pull from,” said Rick Miller, a partner at retail consulting firm Big Chalk Analytics.
A heavy dose of tariff policy-induced chaos means despite those decent economic fundamentals, a lot of us aren’t feeling great about our spending power.
“Consumers are telling us they are still kind of right on the border of being solvent with respect to their budgets,” Miller said.
Which is not exactly a great place to be when the businesses where you shop say they’ll increase prices soon.
As tariffs hit the retail economy, consumers will have to make tough choices, said Jessica Ramírez, managing director of the consulting firm The Consumer Collective.
“They're not going to be spending on a whim. All their spending will be strategic. We saw some of that last year. I only expect that to get even tighter this year,” she said.
Which means retailers will have to get strategic too, Ramírez said, by picking and choosing prices to hike.
“Walmart, the majority is grocery, so they'll try and keep that down. But the reality is, they have electronics, they have toys, they have home furnishing,” she said.
Those categories — the “nice-to-haves” rather than “need-to-haves” — are where Walmart might raise prices first, Ramírez said.
Retailers are also figuring out how much inventory they’ll need months from now. That’s tricky.
If the economy and consumer spending take a turn for the worse, said Craig Rowley, senior client partner at Korn Ferry, “nobody wants to be caught flat footed with too much inventory and too much product.”
But uncertainty around Trump’s tariffs and consumers’ future well-being makes that kind of planning really hard.
“I have to tell you, I have never seen a retail economy, a structure like this in all the years I've done this,” Rowley said.
And he’s been in and around retail for over twenty years.
