United States: Slowdown in Retail Sales Growth and Decline in Manufacturing in April

Following the sharp jump in retail sales in March—partly driven by early purchases in anticipation of tariff hikes—there were concerns about a potential pullback in April. While growth has slowed, given the circumstances, the 0.1% gain remains significant and maintains a positive growth carryover for the second quarter

That said, the monthly sales changes were very uneven across retail sectors. Some sectors that performed very well in March had a tougher April. This was especially true for auto dealers, but also affected pharmacies, leisure-related stores, clothing shops, and the “other” category.

We can feel that the lead-in effect was still present in April. Goods sold were likely imported before facing new tariffs, particularly the steep temporary rates between the US and China. In this sense, Q2 got off to a good start, but it remains to be seen how the rest of the spring will unfold. Tariff-related disruptions and low consumer confidence could lead to further challenges

Industrial production's continued performance in April was largely due to a strong rebound in energy production. Manufacturing output, meanwhile, suffered its first significant monthly decline since October 2024. Notable decreases were seen in the production of automobiles, food, and petrochemical products. Since these sectors often rely on foreign inputs, this may be an early sign of the difficulties the trade war is causing for US manufacturers.

The easing of trade tensions between China and the United States could help prevent significant damage. However, consumption and production indicators are still expected to deteriorate considerably in May. As a result, the current quarter is likely to show more weakness overall than what April’s results suggest.