U.S. retail sales jumped by a record 17.7% from April to May, with spending partially rebounding after the coronavirus had shut down businesses, flattened the economy and paralyzed consumers during the previous two months
The government’s report Tuesday showed that retail sales have retraced some of the record-setting month-to-month plunges of March (8.3%) and April (14.7%) as businesses have increasingly reopened. Still, the pandemic’s damage to retail sales remains severe, with purchases still down 6.1% from a year ago.
In May, employers added 2.5 million jobs, an unexpected increase that suggested that the job market has bottomed out.
May’s rebound was likely aided by the $3 trillion in rescue money that the federal government has provided to companies and households. Retail sales would need to surge by an additional 9% to return to their level before the pandemic.
Any sustained recovery, though, will hinge on an array of factors: The path of the coronavirus, how willing consumers are to shop, travel and congregate in groups, how many businesses manage to stay open and rehire many workers and whether the government provides additional support.
“While the big increase in retail sales in May is encouraging, there is still a huge amount of uncertainty about the strength of the rebound,” said Gus Faucher, chief economist at PNC Financial Services. “It depends on a lot of factors outside of the economics.”
The virus-induced recession not only diminished spending in most sectors of the economy. It has also accelerated shifts in where people shop and what they buy. The changes forced by the coronavirus have aided online retailers and building materials stores and other outlets that stayed open during the outbreak. Other businesses are facing persistent financial strains.
Sales at non-store retailers, which include internet companies like Amazon and eBay, rose 9% in May after posting growth of 9.5% in April. They are up a sizable 30.8% from a year ago.
“Clothiers achieved a stunning 188% monthly gain but still remain down 63% over the past 12 months.”
Retail sales account for roughly half of all consumer spending, which fuels about 70% of total economic activity. Some national chains, by contrast, say they have so far avoided their worst fears. Macy’s CEO Jeff Gennette has said that his company’s reopened stores are regaining 50% of their typical business. Teen retailer American Eagle Outfitters is faring even better, averaging roughly 95% of its normal sales levels.
But analysts caution that some of the gains thus far probably reflect the impact of temporary government aid and expanded unemployment benefits in the face of a deep recession. The jobless rate is a historically high 13.3% by the government’s standard measure and an even worse 21.2% by the broadest gauge of unemployment. For now, Americans are spending disproportionately more on essentials and less on luxuries.
These troubles have contrasted with renewed strength for Walmart, Target and Home Depot, which were deemed essential businesses from the start and were allowed to remain open.
For a group of 35 non-essential retailers, including department stores and jewelry chains, combined losses reached $8.7 billion for the three-month period that ended in May, according to GlobalData Retail. That compares with their combined profit of $2.5 billion in the year-ago period.
Far better off were essential retailers, including dollar chains, discounters and food stores. For that group, profits reached $8.9 billion for the quarter, down only slightly from $9.1 billion from the year-ago period. Established chains like Zara, Children’s Place and Signet Jewelers all announced hundreds of store closures and stressed the rising importance of their online presence.
