American shoppers slowed their spending last month as gasoline prices driven higher by the Iran war left less room for nonessentials such as clothing and furniture. Retail sales increased 0.5% in April, the Commerce Department reported Thursday, a steep deceleration from the revised 1.6% surge in March. March’s gain had been the largest monthly jump in more than three years, fueled in part by a rapid spike in fuel costs.
Excluding sales at gas stations, retail purchases rose just 0.3% in April, down from 0.7% in the prior month. The so-called control group — a measure that strips out food services, autos, building materials, and gasoline sales and is used to calculate economic growth — advanced 0.5%, a sign that consumers were still spending but with less vigor.
Gasoline prices have climbed relentlessly since the Iran war began in late February and prompted the shutdown of the Strait of Hormuz, a waterway through which about one-fifth of the world’s daily oil supply normally passes. AAA reported Thursday that the average price for a gallon of regular gasoline rose to $4.53, $1.35 higher than a year ago.
“Some of this money will have been saved, but much of it has been spent,” Oliver Allen, a senior economist at Pantheon Macroeconomics, wrote in a report, noting that individual income tax refunds in April were $22 billion higher than in the same month in 2025. “But the flow of refunds will taper dramatically in May, leaving consumers far more exposed to the surge in fuel costs.” Allen expects a “meaningful pullback” in discretionary spending in the second half of the second quarter.
Michael Pearce, chief U.S. economist at Oxford Economics, estimated that higher refunds have offset the gas-price hit by a ratio of roughly two to one, but warned the math will soon reverse. “With refund season behind us and gas prices still creeping higher, that will flip in the months ahead, putting downward pressure on spending growth,” he said.
The slowdown was felt unevenly across categories. Sales at department stores fell 3.2%, while furniture and home furnishings stores slipped 2%. Building material and garden equipment sales edged up just 0.1%. At the same time, online retailers and electronics and appliance stores posted solid gains, and restaurant sales — the only services category tracked in the report — rose 0.6%.
Even small businesses are picking up signals of strain. Coulter Lewis, co-founder of Sunday Lawn and Garden, a Boulder, Colorado-based vendor of lawn care products, said sales soared 70% through the end of April compared with a year ago. But beneath that growth, he said, customers are under pressure. Wholesale business is holding up, but shoppers are hesitant to commit to the company’s $300 annual subscriptions.
Lewis said customers are also trading down from professional lawn services, which can cost $1,000 a year. “They’re spending more money on fewer things,” he said. “That trade-down from pro service is like, ‘okay, well we’ve got to make room for these other increases in our life, and so I’m going to try to do this myself.’”
The spending pressures come as broader inflation indicators are flashing red. The Labor Department reported Wednesday that its producer price index jumped 1.4% in April — the biggest monthly gain in more than four years. A day earlier, the consumer price index showed prices 3.8% higher than a year ago, the largest increase since early 2023. Both measures were driven largely by energy costs, but the increases are seeping into everything from plane tickets and baggage fees to soap and toothpaste.
Despite the drag from energy costs, the U.S. labor market continues to hold up. Employers added 115,000 jobs in April, a stronger-than-expected figure, and Thursday’s report on weekly applications for unemployment benefits registered 211,000, still within historically low ranges.
A clearer picture of how inflation is hitting households may come next week, when major retailers including Walmart and Target begin releasing quarterly financial results. For now, the data suggests consumers are still spending, but the support that kept them afloat is about to erode.