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First Cut: May retail sales rebound sharply, but have yet to return to pre-recession levels

Retail and food sales jumped 17.7% in May from April as consumers exercised pent-up demand when some restrictions of public interactions were lifted. The 44.1% acceleration in motor vehicle sales in May was not wholly unexpected, but that still left sales excluding motor vehicles up a solid 12.4%. Some of that was attributable to a 12.8% increase at gasoline stations that was due more purchase at a higher price than in the previous month.

“Core” retail sales – sales excluding motor vehicles, gasoline, and building materials – were up 12.9% in May from April.

The month-over-month increase in May retail sales may have included some greater willingness to spend Economic Impact Payments (EIP) rather than put it straight into savings. Additionally, enough workers were recalled to jobs that it may have lifted confidence enough to do a little shopping. However, the May numbers could be a one-off with renewed concerns about the spread of COVID-19 and prospects for an extended period of sluggish recovery once the recession ends.

I note that retail sales have yet to recover to levels before the recession began in March. The dollar value of retail spending was down 6.1% from May 2019, although that was better than the down 19.9% year-over-year in April. Sales excluding motor vehicles were down 6.6% compared to May 2019 and “core” retail sales were 5.4% lower than a year ago.

Where the pent-up demand comes in was a sudden rush for clothing and accessories of up 188.0%, for furniture stores at up 89.7%, sporting goods at up 88.2%, and electronics up 50.5%. Less of a surprise was the 29.1% increase for restaurant purchases or for building materials at up 10.9%. Sales remained on an uptrend for nonstore retailers which rose 9.0% in May after 9.5% in April.

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