The National Retail Federation (NRF) released new research that consumers are feeling anxious and confused over the possible impacts of tariffs on the economy. “Halfway through the year, it is still difficult to predict the impact new tariffs and other government policies will have on the U.S. economy,” the NRF said.

“This year began with high expectations for the strength of the U.S. economy,” National Retail Federation Chief Economist Jack Kleinhenz said, noting strong 2.8% year-over-year growth in gross domestic product in 2024 that was led by consumer spending and helped by business and government spending. “Since then, anxiety and confusion have taken center stage in the economy and financial markets as uncertainty over public policy has intensified. It was difficult to judge how policy changes would impact the economy in early 2025 and it remains so now.”

Despite uncertainty about the future, the NRF said that “economic growth is holding up relatively well” so far this year. GDP fell at an annual rate of 0.5% in the first quarter, but that was mostly because of a surge in imports driven by tariff announcements.

Year-over-year inflation as measured by the Personal Consumption Expenditures Price Index ticked up to 2.3% in May from 2.1% in April. Unadjusted for inflation, personal income and consumer spending were both up 4.5% in May. Core retail sales as defined by NRF—excluding automobile dealers, gasoline stations and restaurants—were up 3.9% year over year both in May and for the first five months of the year per the report.

Tariffs have yet to be clearly seen in prices, said the NRF. “However, if the large increases in tariffs announced earlier this year take effect and are sustained, they will infiltrate consumer prices, causing a downshift in spending that is likely to spill over into the labor market later in the year with higher unemployment,” Kleinhenz said.

With the One Big Beautiful Bill Act spending measure signed into law, there are many moving parts that “could greatly alter the economic outlook” depending on how businesses and consumers react, Kleinhenz said. Nonetheless, adoption of the bill—which provides business incentives, permanent tax cuts for individuals and measures to induce more workforce participation—“meaningfully reduces fiscal policy uncertainty.”

Meanwhile, the labor market is performing better than expected, with employers adding 147,000 jobs in June, just above the monthly average of 146,000 over the past year.