- Retail sales surged by 17.7% month-on-month in May completely blowing away market expectations of 8% growth. Moreover, the April figure was revised up from a 16.4% contraction to a 14.7% decline. The level of retail sales in May was 7.9% below where it was in February, prior to state lockdowns.
- The volatile categories of motor vehicles and parts (+44.1% m/m), building materials and garden equipment (+10.9%), gasoline stations (+12.8%), and food services and drink places (+29.1%) recorded solid rebounds last month.
- Even excluding these groups, retail sales rose by 11%, the strongest increase since the series began in 1992. Sales of clothing and accessories drove the surge, rising by 188% on the month, followed by a 70.8% pick up in furniture and household furnishing and electronics/appliances sales. Non-store retailers continued to make headway in May, advancing by 9%. Since February, these retailers have seen a 25% increase in sales.
Key Implications
- Wow, consumers came back in a big way in May as states began reopening their economies. Today’s report provided further evidence that the worst of the COVID-19 economic shock was behind us.
- While consumers readily loosened their purse strings last month, it is not an indication that things are back to normal. One-time checks and expanded unemployment insurance, provided by the CARES Act, has more than offset losses in employment income for most households. This helped support the rebound in retail sales.
- With expanded unemployment payments set to expire in July, households could see a significant drop in income if unemployed members have not returned to work. The turnaround in the labor market in May was promising, but if it stalls, Congress should stand ready to provide additional support to American households.
