Retail Pulse Report: The News is NOT Good

One-dimensional, transactional relationships lead to lots of predictable, avoidable consequences. Retail is a lagging indicator, not a leading one.

Source: Adobe Photostock. “Worried Store Manager”

Well, if you were hoping for some good news to lighten the load heading into this week, you won’t get that from me. I’m definitely not a day trader, so the financial markets impact, while a wild ride, has been something for me to avoid, not something that drives me to check my portfolio obsessively – that would be too depressing, and I’m supposed to be in it for the long term. Ignorance is not bliss, it’s a mental health mechanism.

Unfortunately, more and more lights on the dashboard are flashing red and new alarms are going off even as we speak – alarms on the economy that I didn’t even know we had. A lot of that is way outside my expertise or interest. But it’s getting easier than ever to see what it all means for retail.

Let’s dive in.

Retail Economic Indicators

Both the US and the UK released a lot of retail economic indicators this last week so there is a lot of news to chew through.

In the US, March sales were up 4.6% year over year according to the US Census Bureau – well above inflation. Most of it was driven by a surge in auto sales so it was easy to point to pre-tariff panic buying as the major cause. The CNBC/NRF Retail Monitor showed about the same – March sales up 4.75% year over year, on top of an increase of 3.38% in February. These numbers came in after the tariffs were announced on China, Canada, and Mexico but before the blanket 10% or the “Liberation Day” tariffs. Let’s also keep in mind that Easter was earlier last year, so these increases come without a similar Easter spending bump to help drive them.

If you think that’s cause to celebrate, it came along with the second-lowest level of consumer confidence on record, at least according to the University of Michigan Consumer Sentiment Index. It fell 11% in April. The Index’s authors note that this was “pervasive and unanimous across age, income, education, geographic region and political affiliation.” The current conditions index fell 11.4% in April, to 56.5, and the expectations index fell 10.3% to 47.2, the lowest since May 1980. The share of consumers expecting unemployment to rise in the year ahead increased for the 5^th consecutive month and is now more than double the November 2024 reading.

Retailers are taking action in the face of radical uncertainty – the NRF & Hacket Associates Global Port Tracker has dramatically revised its forecast downward – instead of a record year, they expect imports to be down 20% year over year for the second half of 2025. Even with a rush of imports in the first half as retailers sought to beat impending tariffs, they believe there will still be a net decline of 15% in import volumes for the year. May is now forecast to be down 20.5% year over year, and June and July down even more.

Meanwhile in the UK, inflation fell more than expected to 2.6% in March, after coming in at 2.8% year over year in February. The fall was driven mostly by a fall in petrol prices that were partially offset by overall rises in clothing prices. And UK retail sales were up 1.1% year over year in March. Even though this is still less than inflation, they pointed out that this is stronger than it looks due to the timing shifts of a later Easter this year.

In the UK, the retail industry is nervous – not unexpectedly so. They just took on new budget increases in both wages and health care costs. They had been turning to the US market more and more as they recovered from Brexit and the pandemic, and this is now largely in doubt. They’re worried that unless their own government does something, they’ll be on the receiving end of a dumping ground of Chinese-made goods that can’t be sold in the US, undermining their own competitive stance. And some are hopeful that all this mess will create a greater need for the UK and the EU to unthaw their Brexit-frozen trade relationships.

As for the US, the mess is really just beginning. If I shared all of the larger macro-economic analysis and opinions I’ve read in the last week, you would be as depressed as I am. That split between consumer spending and consumer confidence is probably the widest it has ever been. That is not a good thing – it means we have not seen the behavioral fallout, for either businesses or consumers, that now seems inevitable. More on that below.

Retail Tech & Research Data

Numerator released two consumer surveys in April, testing the waters for consumer confidence and concerns about the impact of tariffs. On tariffs, 89% of US shoppers say they are aware of new or proposed tariffs, which means everyone is now paying close attention to whatever happens next. Only 11% say they don’t have a good understanding of what tariffs might mean for prices going forward. 85% of US shoppers say they are concerned about how tariffs will impact their personal finances. 72% are concerned about higher prices on everyday goods.

On economic impact, 72% of US households are very or somewhat concerned about a recession in the next year. 55% of US households believe tariffs will be bad for the economy. 52% of US households think the economy will be worse off by this time next year. There were differences by party affiliation or regions that voted for Trump, but they still expressed the same pessimism or lack of confidence, just at a slightly lower rate than the average.

I use Google Alerts to track a lot of my news of interest week to week, and sometimes it pulls something out of the wayback machine to deliver at my doorstep. This one was too good to pass up, though. According to the Progressive Policy Institute, in a “trade fact of the week” that was originally published in December 2023, US tariffs cost women more than men: “The U.S. Harmonized Tariff Schedule divides goods into 11,414 ‘lines,’ each with a tariff rate. Chapters 61 and 62 cover clothes. Unique in the Tariff Schedule, they divide most clothes by gender and freely impose different tariff rates for similar items based on this division." Different, as in, higher tariffs for women’s clothes than men’s.

While Trump’s tariffs have not specified such distinctions – that would require a level of granularity and care in analysis that we have yet to see – I have no doubt that the same administration that is erasing women from history online would have no problem perpetuating a 3-5% higher tariff rate for women’s clothing than for men’s.

AI & Retail

I meant to call out this story last week, and missed it in my notes, so here it is for you this week. The Hustle put a bunch of transcripts, speeches, and writings of the CEOs of Southwest, Starbucks, and Nike into an AI and then chatted up each of their AI versions with a bunch of questions to see what it would say. It’s entertaining in its own right, but the key quote is at the top: “In some ways, our AI CEO's acted more humane than human CEO's." Wouldn’t it be ironic if the job that ultimately gets the most displacement due to AI is the CEO? Given the disparity between pay at the CEO level vs. frontline workers, it would certainly be the easiest way to make cost savings!

Retail Winners and Losers

Target continues to get bashed for abandoning DEI, to the point where the latest news is their executives are planning on meeting with Al Sharpton to try to salvage something, anything out of this. I mean, first of all, I don’t understand why these companies don’t just play “whack-a-mole”. Yes, Trump team, I have ended my DEI program, and then a week later announce an “Open Doors Initiative” or “Community Participation Program” or “Opportunity Taskforce”. Satisfy the conditions of the demands, and then start something new that just uses different words to mean the same thing. In the blitzkrieg of disruption that this administration is going after, they don’t have time to go back and look, they’re already off to the next implosion they’re trying to create.

But second of all, this collision between purpose and profit was inevitable. Consumers first turned to it because they wanted companies to use their considerable budgets and influence to sway things where it increasingly felt like votes didn’t matter. If I can’t make change happen at the ballot box, then I’ll vote with my wallet, was the thinking. Companies wanted the wallet, so they took up causes in order to lock in loyalty. But now that those causes are costing them in other ways, they’re trying to step back to more neutral ground and finding that consumers won’t let them. This essay describes the issue perfectly. There will always be tension between purpose-driven marketing and profit-driven behavior, and no one should pretend there is no business case to values – or that values don’t need a business case. I recommend reading the whole thing.

I covered the UK perspective on tariff impacts above, but have to add in some perspectives on the impact to Chinese manufacturers and retailers – and to the small sellers who are also their customers. I’ve seen mixed reviews about what the Chinese tariffs mean for Amazon and its sellers. According to CNBC, up to 70% of goods on Amazon come from China, whether sold directly by Chinese sellers, imported by US sellers, or sold directly by Amazon itself. At a minimum its marketplace is going to take a hit, and for Amazon that’s one of the most valuable, easy-money parts of their business.

But the US importers who sell on Amazon are by far the most vulnerable – people like the backpack company I covered last week, or the baby spoon brand that CNBC covers this week. They design and sell, Chinese (or other country) manufacturers make and ship. And even in cases where factories have been built outside of China in the last five years, that was most often done by Chinese companies, including in Mexico.

In the meantime, TikTok is apparently getting flooded by Chinese manufacturers claiming that they make a lot of luxury brands, from clothing and accessories to cosmetics and fragrances. They are urging people to buy directly from them and save money, even with the tariffs. The responses on TikTok contained full-on internet shade, including things like advertising like this will surely get TikTok banned, to speculation that China would give free rein to counterfeiters as yet one more avenue for retaliation against tariffs.

What Did We Learn This Week?

Macro-economic views and experts have an even more depressing take on just how much damage the Trump administration is doing to the US economy, the global economy, and the US’s standing in the global economy. “It’s the bond markets, stupid” is the new “It’s the economy, stupid.” That’s not my lane, but it’s a direct input into what happens in retail, and the news is not good.

However, I still think we have at least another month, if not two, before we see what kind of real behavioral impact this has on consumers. Confidence is low, but spending is still high, panic-driven or otherwise. Unemployment impacts have not started to trickle through the economy yet. Federal workers, yes. But not yet the company on the receiving end of a cancelled government contract, or the sandwich shop next to the federal office that now sits empty. The farm that lost all its school lunch contracts, or the university professor who just got her hours cut because foreign students aren’t enrolling – we have not yet seen the consumer behavior changes that will inevitably result from these people having to make all new choices about their finances.

I’ve seen some comparisons drawn that this is “America’s Brexit” – with all of the downsides that predictably happened to the UK. Except that the UK’s currency and financial instruments were not the center of the economy they were trying to leave. Which makes everything the US does so much worse, because our currency and financial instruments ARE at the heart of the global economy. It’s very hard to believe that anything good is going to happen in retail in 2025. I would love for all those economists and analysts to get that wrong. I would love to be wrong. But it is increasingly difficult to see a positive ending here.

It’s not America’s Brexit, it’s Ameri-wrecks-it. For everyone.

Deep breaths! Until next week,

- Nikki