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Published June 17, 2020
Published June 17, 2020
Arturo Rey via Unsplash

After two months of steep declines in sales caused by most of brick-and-mortar retail shuttered due to the pandemic, April saw a 14.7 percent drop, the largest monthly decline in nearly three decades of record-keeping, and an 8.3 percent decline in March. However, the government said Tuesday that retail sales jumped a record 17.7% in May. Economists polled by MarketWatch had forecast an 8.5% increase.

  • Excluding motor vehicles and parts, which popped by 44.1%, May’s gain came in at 12.4%, which is also the best on record going back to 1967.
  • Department store sales rose 36.9%.
  • E-commerce jumped 9% from already massive gains.
  • Big-box store sales rose 6%, and grocery stores 1.3%.
  • Sales leaped 188% at clothing stores.
  • 90% increase at home-furnishing stores.
  • 88% at stores that sell books, music, sporting goods, and other hobby items.
  • Grocery sales recorded a much smaller 1.3% increase in sales after a record 14.4% spike in April.
  • Health and personal care—pharmacies, salons, barbers, and so forth saw sales increase just 0.4%.

Yet even after the rebound in May, sales were still 6% lower compared to the same month in 2019, showing the lingering damage caused by the lockdown.

What The Experts Are Saying:

“I think a lot of it is lockdown fatigue,” Beth Ann Bovino, chief U.S. economist at S&P Global, told the New York Times. “I would caution not to be fooled by this large gain. We still have a long way to go in repairing the economy.”

Aneta Markowska, the chief financial economist for the investment bank Jefferies, said to the New York Times that while she had anticipated a jump in retail sales in May, it was off “a pretty low hurdle.” The bigger question was the sustainability of any improvement, since spending was bolstered by tax refunds and government stimulus efforts.

“By the time we get into July, those tax refunds will probably be largely spent,” Ms. Markowska said, “and then you’re back to, hey, what’s the underlying employment growth? Because that’s going to have to be the key driver of spending going forward.”

“There is some indication there is normal behavior out there,” Jay Sole, a retail analyst at UBS, said to the New York Times, “where people want to go back to normal, they want to go have fun, get out of the house, and they’re buying the apparel they need to do that.”

“The economy and retail sales have hit the bottom in May and we have a V-shaped first stage of recovery,” Sung Won Sohn, a business economics professor at Loyola Marymount University in Los Angeles, said to Reuters. “However, it will take quite some time to get back to anywhere near the levels of retail sales and economic activity we enjoyed around the turn of the year.

“The strength of retail sales is testimony to the power of reopening the economy, even partially,” Chris Low, Chief Economist at FHN Financial, said to Market Insider. “It is also a testimony to how big the decline in activity was in the three months through April.”

He added, “There’s no question you’ll be hearing a lot of ‘V-shaped’ commentary if you tune into CNBC today, but even after the spectacular rise in May, consumer spending still has a long way to go before it recovers.”

“It’s a blowout number,’’ Sebastien Galy, a macro strategist at Nordea Asset Management, told the Wall Street Journal. “This is a very sharp rebound and is very encouraging for the U.S. and the global economy as a whole. While we still might not see a V-shaped recovery, we’re certainly moving away from a U-shaped one.”

“We look for record household savings to help fuel the sharp pick-up in spending in the third quarter that might not be possible through monthly income alone,” said Tim Quinlan, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. “Still, even after the extra savings have fueled spending for the next year and a half, we still anticipate that the real level of personal consumption expenditures will end 2021 about 2.5% below where it was at the end of 2019.”

“How much of the spending was from pent-up demand and how much was fueled by government checks is what’s now up for debate,” said Robert Frick, corporate economist at Navy Federal Credit Union. “To continue this strong spending, we’ll need more strong job growth, and, for the time being, continued government help.” said to MarketWatch.


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