U.S. workers are forced to spend more of their shrinking wages on fewer necessities as retail sales data for April reveals a slowdown in consumer spending, directly linked to soaring gas prices fueled by the ongoing Iran war. Overall retail sales increased by a mere 0.5% in April from the prior month, a sharp deceleration from the revised 1.6% increase recorded in March, according to Commerce Department data released Thursday. This slowdown indicates a tightening squeeze on working-class households.
Excluding sales at gas stations, retail sales rose only 0.3% in April, a slower pace than the 0.7% increase seen in March. A separate measure, the control group, which strips out autos, building materials, food services, and gas station sales, also rose by 0.5% in April. Reuters reported that core retail sales, which exclude autos, gas, building materials, and food services, increased by 0.5% in April, following an upwardly revised 0.8% increase in March.
War Fuels Price Hikes
The primary driver of this economic pressure is the escalating cost of fuel. Sales at gas stations surged by 2.8% in April, although this was a decrease from March’s 13.7% increase. The average price for a gallon of regular gasoline reached $4.53 on Thursday, marking a $1.35 increase from a year earlier, according to AAA. This price spike is directly attributed to the Iran war, which began in late February of the same year and led to the shutdown of the Strait of Hormuz, effectively cutting off one-fifth of the world’s daily oil supply. This disruption allows energy capital to extract greater surplus from every worker's commute and household budget.
Spending patterns across other categories reveal the impact of these rising costs on workers' discretionary income. Sales plummeted by 3.2% at department stores, 2% at furniture and home furnishings stores, 0.5% at car dealerships, and 1.5% at clothing shops. While online retailers and electronics and appliance stores posted gains, with sales at electronics and appliance stores rising 1.4%, these selective increases do not offset the broader contraction in spending on essential household goods and services. The lone services category in the report, restaurants, saw a modest 0.6% rise.
Temporary Relief Fades
Economists acknowledge that larger tax refunds, a temporary measure from President Donald Trump’s tax cut legislation, had provided some support for spending earlier in the year. However, this state-backed, temporary relief is expected to dissipate. Oliver Allen, senior economist at Pantheon Macroeconomics, estimated that individual income tax refunds in April were $22 billion higher than in the same month in 2025, an amount roughly equivalent to 3% of monthly retail sales and slightly larger than the immediate hit to households from the jump in gas prices. Allen noted that while some of this money was spent, the "flow of refunds will taper dramatically in May, leaving consumers far more exposed to the surge in fuel costs." He anticipates a "meaningful pullback" in discretionary spending in the second half of the second quarter. Michael Pearce, chief U.S. economist at Oxford Economics, also stated that the 2-to-1 offset of tax refunds against gas prices will "flip in the months ahead," putting "downward pressure on spending growth."
Workers Bear the Cost
This structural vulnerability is already evident in the daily lives of workers. Coulter Lewis, co-founder of Sunday Lawn and Garden, observed that consumers “are spending more money on fewer things.” Lewis added that this leads to a “trade-down from pro service,” where individuals say, “‘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.’” This reflects the constant pressure on working-class households to absorb rising costs by sacrificing services and personal time.
Despite these clear indicators of worker struggle, investment analysts like Bret Kenwell of eToro maintain a narrative of "consumer resilience." Kenwell wrote that “April retail sales echoed what we’ve heard across corporate conference calls for weeks now: The US consumer remains resilient despite soaring gas prices.” He cautioned, however, that “Fuel-price spikes typically take a couple of months to work their way into household budgets, so if energy costs stay high, the second half of the year could present a more complicated setup for consumers, the economy, and the Fed.” This perspective often overlooks the material conditions of the working class until the contradictions become too large to ignore.
Consumer sentiment has already weakened, with the University of Michigan’s latest survey showing a plunge in perceptions of the current economic environment earlier this month. This decline is attributed to a surge in concerns about high prices for personal finances and major purchases, underscoring the real impact on workers. While U.S. employers added 115,000 jobs in April and unemployment held steady at 4.3%, these figures do not negate the reality of wage suppression and the increasing cost of living for those who rely on their labor to survive.