INFLATION’S IMPACT ON RETAIL SALES GROWTH – May 2025
Inflation seems simple – just compare this year’s prices to the same time last year. In fact, it is more complex. The most important thing to remember is that it is cumulative so even when the YOY rate slows, it can cause a range of issues – selling less product and even a drop in revenue. One impact that is often ignored is slowed $ growth. That is the focus of this report. In order to give an accurate reading of the situation we will include charts for the Big Retail Groups and the “Advance” Relevant Retail Channels. We will also include separate charts for Monthly & Ytd data to better show trends.
First the Jan>May Monthly Report for Big Groups (100% of U.S. Retail $)
We also included the Y/E numbers for 2024, both actual & average, to show our goal – Beat these lifts!
There are things that immediately stand out. One is expected – a BAD February. It is often the low point of the Retail year. In 2025, the lift vs 24 was -78% below avg for Relevant Retail, but Total and all other groups had drops. A positive is January. Gas Stations had their only monthly lift in 25. It was below avg but all other groups had above avg lifts. Now May, only 1 above avg lift – a big turnaround from 4 in April. We also should note Auto. They had a big Mar>Apr lift due to impending tariffs. That ended in May as their YOY lift was -47% below avg.
Restaurants – The February drop was small and the other 4 months had lifts above average. The Mar>May lifts were 6+%, peaking at +6.4% in May, 13.6% above average. If they can continue their post-February performance, they will likely have a great year.
Auto – Except for May, Their pattern is the same as Restaurants but with lifts much more above average, especially in March & April. The Mar & Apr lifts were basically double the average. The 25% tariff was effective 4/3/25. Consumers saved thousands of dollars, but the binge buy ended. The May lift was only +2.4%, -47.3% below avg.
Gas Stations – They are truly in turmoil. Their only plus month was -42% below avg and all drops were bigger than 2024.
Relevant Retail – They do about 60% of Total Retail $ so it’s no surprise that they have a similar pattern. 1 big difference is that they were +1% in Feb – no drop. The Feb/Mar & May lifts were below avg while the Jan & Apr lifts were above avg. Their 23>24 lift was above Total Retail. In May their lift was much better than Total, but their progress stopped.
Total Retail – They had a drop in February, but March was basically equal to the average and Jan & Apr were slightly above average. All non-Feb months had lifts above the 3.0% 23>24 Y/E increase but the May lift was only +3.1%, -34.9% below avg. Their progress has also stopped.
Summary: Jan: $↓: 0; ↑Avg: 4; ↓Avg: 1; Feb: $↓: 4; ↑Avg: 0; ↓Avg: 1; Mar: $↓: 1; ↑Avg: 2; ↓Avg: 2; Apr: $↓: 1; ↑Avg: 4; ↓Avg: 0; May: $↓: 1; ↑Avg: 1; ↓Avg: 3; TOTAL 5 MONTHS in 2025: $↓: 7; ↑Avg: 11; ↓Avg: 7
Now let’s take a closer look at Relevant Retail. We will report on the 11 channels in our Advance report.
11 Relevant Retail Channels (98% of Ytd Rel Rtl $)
Relevant Retail – Their +3.6% lift in 24 was -22.8% below average. No drops in 25. The lifts for February, March & May were below average but January & April were above average.
Furniture – No drops. Lifts were double the average in January, March, April & May. The big lifts in Mar>May were probably due to fear of skyrocketing prices from impending tariffs.
Electronics/Appliances – They have ongoing high deflation. $ Drops in both January & February. Sales turned positive in Mar>Apr, then dropped in May. Both of the 2 lifts were below average.
Bldg Matl/Garden/Farm – They had the smallest of the 4 drops in 23>24, -0.6%, but the 3rd biggest decrease (of 6) in February, -6.1%. They had lifts in Jan, Mar & Apr but all were below average. This includes their normal Spring lift. The April increase was -77% below average and May saw their 2nd 2025 drop. Cumulative 19% inflation was probably a factor.
Grocery – Sales were only +2.0% in 24, -36% below average but they surged in January to +5.1%, 63% above average. Growth slowed to 1% or less in Feb>Mar, 70+% below average. However, they had a strong rebound in April. Sales were +5.9% vs 24, 94% above average. The big lift contributed to a smaller May lift of 2.6%, 56% below Apr & 18% below avg.
Health/Drug – Sales were +3.6% in 24, -31% below average. The lift grew slightly in Jan>Feb to 4+% but it was still about -20% below avg. Sales surged in Mar>Apr to +8.8%, 75% above average, then slowed to +6.7% in May, but still 30% above avg
Clothing – 24 $: +2.5%, -19% below avg. Then a strong start to 25, +5.4%, 67% above avg. Sales fell -2.4% in Feb, but in March the lift exceeded the average by 3%. They “took off” in April to +6.7%, more than double the avg lift. The strong lift continued in May, +5.9%, 73% above avg. Like Furniture, the big lifts were likely due to fear of impending tariffs.
Sport/Hobby/Book – They were -2.8% in 24. This trend continued in Jan>Feb, peaking at -6.4% in February. In March they turned slightly positive, +0.4% but this grew in April to +1.5%, -51% below avg & +2.8% in May, just -13% below avg.
Department Strs – It’s difficult to find something positive. They were -4.6% in 24 and had drops Jan>May in 25. The biggest drop was -5.9% in February – no surprise. Sort of good news: 2 drops were 58+% less than the average drop.
Clubs/SupCtrs/Value/$ – They offer Brick ‘n Mortar value and the convenience of 1 stop shopping. They have had strong growth since their creation. COVID further accelerated growth so it is no surprise that all lifts are below avg. They even had small <-0.3% drops in Feb/Mar. Things improved in April, +5.3%, then slowed to +3.8% in May. Jan was best, +5.7%.
Miscellaneous – Pet Stores account for 15+% of this group’s sales. They had below avg lifts in Feb & Apr. The Jan, Mar & May lifts were 80+% above avg and peaked at +8.4% in March. They have the 2nd best performance of any channel, behind Furniture Stores, and they achieved it without the benefit of a pre-tarifflation buying surge.
Nonstore – 90% of $ are from internet/mail order (vast majority is internet). The Internet has had strong sales growth since its inception, but it skyrocketed due to COVID’s “stay at home” behavior. They have an average lift of about 10%. Their 24 lift was +8.1%. All lifts in 25 were below this and below average – no surprise. Low: Feb +5.0%; High: Mar +7.2%
SUMMARY
23>24: $↓: 4; ↓Avg: 6; ↑Avg: 1
TOTAL 5 MONTHS in 2025: $↓: 15; ↓Avg: 24; ↑Avg: 16
Jan: $↓: 3; ↓Avg: 4; ↑Avg: 4; Feb: $↓: 6; ↓Avg: 5; ↑Avg: 0; Mar: $↓: 2; ↓Avg: 5; ↑Avg: 4;
Apr: $↓: 1; ↓Avg: 6; ↑Avg: 4; May: $↓: 3; ↓Avg: 4; ↑Avg: 4;
In the above Summary, regarding Drops and Above Average lifts, green indicates the best and red is the worst. Obviously, the best month is April and the worst is February. However, the biggest positive change occurred in March. 4 channels with drops turned positive. 3 became below average and 1 above average. 3 with below average lifts moved up to above average. The classification of 4 were unchanged so 7 channels fueled the improvement. April was only a little better than March as 1 drop moved up. May was worse than April due to 3 drops. Note: 4 has become the norm in above avg lifts. We also can’t forget January. There was only a slight improvement in the number of positive lifts vs Y/E 24, from 7 to 8 but the number with above average increases rose from 1 to 4 – a significant change. Even with May drops, the situation has improved since hitting bottom in February. The CPI is still low and fear of impending tariffs has had a positive impact.
Now let’s take a different view of the data from the Big Groups and the same 11 channels. Rather than monthly sales, we we will look at Ytd numbers. We will still view them monthly so we can see any trends.
The Ytd numbers are arguably the most important. In December, they become Year-End, which is the most quoted and remembered data in any year. While the monthly data shows what’s happening in the marketplace right now, the Ytd data consolidates the data. This blending extends the impact of big sales spikes – positive or negative. This can be either good or bad. The impact of the big drop in February 25 was lessened by the widespread Above Average January lift. It can also work the other way. The big February drop reduced the positivity of strong lifts in March and April. Overall, the May lift was similar to April, so progress stalled. We’ll begin our analysis with the Big Retail Groups.
The first thing that you notice is that the spending patterns for Restaurants and Relevant & Total Retail are virtually identical. All groups had January lifts and all, but Gas Stations were Above Average. However, only Auto had Above Average lifts in Mar>May. Also, only Gas Stations had any sales drops. Overall, the improvement paused in May.
Restaurants – Sales for 24 were +5.2%, -7% below average. They flipped in January as the lift vs last year grew to +5.5%, 5.4% above average. The lift radically slowed in February to +2.4%, -57% below average. The situation steadily improved in March/April and even slightly in May as the YOY increase grew to +4.7%, -15% below average.
Auto – Sales were +2.3% in 24, -47% below avg and the worst “positive” performance of any group. They turned it around in January with a +5.8% lift, 32% above avg. The lift dropped to +2.0% in February, -55.5% below avg and the smallest lift of any positive big group. Due to pre-tarifflation buying the lift took off in Mar/Apr, reaching +5.9% in April, 33% above avg. In May the surge ended, and the lift fell to 5.1%. They are the only Group with Feb>May above avg lifts.
Gas Stations – Whether you look at the data monthly or Ytd, they are doing bad. The May Ytd sales drop of -4.2% is even 45% worse than the -2.9% at Y/E 24. That does not bode well for 2025.
Relevant Retail – Except for January, +5.0%, they seem to be stuck in the 3% lift range. Thanks to an Above avg monthly lift, April Ytd, +3.9%, did finally exceed the +3.6% of 2024. The lift stayed at +3.9% in May, but this was -17.4% below the monthly avg. Their slow, steady Mar>Apr progress paused in May.
Total Retail – The pattern matches Relevant Retail but the YOY changes for all but January are smaller and in May their lift slowed. With similar averages, Total has bigger disparities. Total includes Auto & Gas Stations which have had extreme lifts & drops. Their steady Mar>Apr progress also paused in May, but their Ytd lift has been above 24 since March.
Summary and Comparison of Monthly to Ytd
Monthly: Drops: 7; Below Avg Lifts: 7; Above Avg Lifts: 11
Ytd: Drops: 4; Below Avg Lifts: 14; Above Avg Lifts: 7
Mon: Jan: $↓: 0; ↓Avg: 1; ↑Avg: 4; Feb: $↓: 4; ↓Avg: 1; ↑Avg: 0; Mar: $↓: 1; ↓Avg: 2; ↑Avg: 2
Ytd: Jan: $↓: 0; ↓Avg: 1; ↑Avg: 4; Feb: $↓: 1; ↓Avg: 4; ↑Avg: 0; Mar: $↓: 1; ↓Avg: 3; ↑Avg: 1
Mon: Apr: $↓: 1; ↓Avg: 0; ↑Avg: 4; May: $↓: 1; ↓Avg: 3; ↑Avg: 1
Ytd: Apr: $↓: 1; ↓Avg: 3; ↑Avg: 1; May: $↓: 1; ↓Avg: 3; ↑Avg: 1
January Monthly & Ytd are the same. The highlights in the summary clearly show that the Ytd report levels the Feb>May data. The situation doesn’t look good Ytd but it is better than 2024 for all but Gas Stations. Both reports show that it was improving for all but Gas Stations…until May.
Now, Let’s look at Ytd Sales for Key Relevant Retail Channels
The Ytd chart looks a little more consistent than the Monthly chart. This is true. Ytd extends the impact of big lifts or drops. The result is that the Ytd version has 20.8% less Below Avg lifts (middle ground), but 20% more Drops & 12.5% more Above Avg lifts. Ytd also has 3 channels that had drops every month in 2025. Monthly has only 1. However, Ytd has 2 channels with Above Average lifts every month. Monthly has none. It’s a complex situation. Let’s get into the specifics.
Furniture Stores – They are going strong. Their huge January lift pushed the February Ytd lift from below to above avg. Now, all months are above average. Tarifflation fear caused binge buying in Mar>May so the current lift is double the avg.
Electronics/Appliance – Ytd they are all negative. This version hides Mar>Apr lifts. The positive impact in the Ytd chart was that their YOY drop slowed from -5.0% in February to -1.9% in May.
Bldg Matl/Garden/Farm – Their big February drop turned March from a below average monthly lift to a -0.4% Ytd drop. In a reversal, Mar/Apr lifts made Ytd April minimally positive, +0.02%. Then sales fell -3.0% in May.
Grocery – Their big January lift made their situation look significantly better in Ytd. However, it effectively hid the above average lift in April. Note: The current Ytd lift (+3.0%) is 50% above 24 Y/E and just 3.5% below the annual average.
Health – Monthly & Ytd have a similar pattern – Jan>Feb, below average lifts; Mar>May, above avg. However, the May Monthly lift was not as big as Mar>Apr but it was still enough to increase May Ytd.
Clothing – They had a +5.4% lift in January, 67% above avg. This eliminated the February drop in Ytd but the February drop changed Mar from above to below average in Ytd. Apr/May Monthly lifts were big and pushed both above avg Ytd.
Sport/Hobby/Book – They had drops in Jan>Feb. Feb was -6.4%. This turned Ytd all negative. It also hid the possible start of a recovery. Mar>May had increasing monthly lifts. All were below avg but May was only -13% less.
Department Strs – Both reports show drops every month. They have been fading for years. It continues.
Club/SupCtr/Value/$ – They offer value and convenience, the biggest shopping drivers. Some $ stores are struggling but SuperCenters/Clubs are still going pretty strong. Besides the internet, one problem in sustaining strong growth is that they are running out of new customers. The Monthly report had a -0.2% drop in February and a -0.3% drop in March. The Ytd numbers look better. There are no drops, but the May Ytd lift is only +2.8%, 67% below average.
Miscellaneous – This is probably our favorite channel because it includes pet stores. They also have great performance. In the Monthly report, only the YOY lifts for February and April are below avg. All other months are above avg. The Ytd report is even better. All months are above average and May is +6.1%, 41% above average and 13% more than Y/E 24.
Nonstore – They are driven by the internet which has had the strongest growth and became the biggest $ channel in 2020. The Monthly & Ytd reports have similar patterns – all months below avg. May Ytd is +6.4%. That sounds great but it is -36% below average. We’re seeing that it is difficult, if not impossible to maintain double digit growth…forever.
Relevant Retail – Their $ come from a mixture of different spending patterns. They had no drops and both Monthly & Ytd show Mar>Apr growth and a May pause. Ytd hides the Above avg April lift, but it shows that the group’s performance in Apr/May now exceeds 2024…+3.9% to +3.6%. Here is a summary and comparison of Monthly to Ytd for the 11 channels.
Monthly: Drops: 15; Below Avg Lifts: 24; Above Avg Lifts: 16
Ytd: Drops: 18; Below Avg Lifts: 19; Above Avg Lifts: 18
Mon: Jan: $↓: 3; ↓Avg: 4; ↑Avg: 4; Feb: $↓: 6; ↓Avg: 5; ↑Avg: 0; Mar: $↓: 2; ↓Avg: 5; ↑Avg: 4
Ytd: Jan: $↓: 3; ↓Avg: 4; ↑Avg: 4; Feb: $↓: 4; ↓Avg: 5; ↑Avg: 2; Mar: $↓: 4; ↓Avg: 4; ↑Avg: 3
Mon: Apr: $↓: 1; ↓Avg: 6; ↑Avg: 4; May: $↓: 3; ↓Avg: 4; ↑Avg: 4
Ytd: Apr: $↓: 3; ↓Avg: 3; ↑Avg: 5; May: $↓: 4; ↓Avg: 3; ↑Avg: 4
The key differences between the Monthly & Ytd reports are in the lingering Ytd impact of big drops and lifts. Both views are critically important. Monthly shows what is currently happening in the marketplace and Ytd puts it into perspective. They also show trends over time. Ytd provides an overview while Monthly shows the details fueling the movement.
Inflation negatively affects retail growth both in the short term, with spikes or drops, and in the long term, with cumulative high prices. It can even have an impact before it happens. We are seeing this with pre-tarifflation “fear” buying. The current retail situation is not good. The YOY lifts vs 2024 are generally below the long term average for most channels. Retail “hit bottom” in February but most channels (not Gas Stations or Dept stores) showed improvement in Mar/Apr. The situation got worse in May due to more drops but Ytd it is better than 24. Inflation is low with some deflation, but prices are still high. We’ll see what happens.
Finally, for your reference, here are the April and May inflation rates for the CPIs of the retail groups and channels in this report. This includes special aggregate CPIs created with the instruction and guidance of personnel from the US BLS. I also researched data from the last Economic Census to review the share of sales by product category for the various channels to help in selecting what expenditures to include in specific aggregates. Of course, none of these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates. The data also includes the CPI changes vs 2021 to show cumulative inflation. The chart shows both monthly and Ytd inflation so it can be used as a reference for both measurements in the sales growth report.
Monthly YOY CPI changes of 0.2% or more are highlighted. (Green = lower; Pink = higher)
- You see that monthly inflation worsen for 10 channels
- The most significant change was Furnishings flipped from -0.7% deflation to +0.5% inflation
- For 5 channels, the worsening was just a slower deflation rate
- Of the 3 channels with improved inflation
- 2 had increased deflation
- The biggest improvement was in Health/Personal Care where inflation slowed to 0.3% from 1.0%
- Cumulative inflation vs 2021 is still high & stable for most channels, especially Ytd
