Jun 16, 2021 - Economy

A silver lining for retail sales

Change in retail sales, April to May 2021
Data: Census; Chart: Danielle Alberti/Axios

Retail sales in May fell at a greater rate than what economists predicted. But a closer look reveals a somewhat encouraging economic snapshot.

Why it matters: Consumer spending accounts for about 68% of GDP. So, the trajectory of retail sales acts as a rough proxy for the direction of the economy.

By the numbers: According to the Census Bureau, total retail sales fell by 1.3% month over month in May, which was slightly worse than the 0.8% decline estimated by economists.

Yes, but: The prior two month’s numbers were revised up significantly. April retail sales actually grew 0.9% month over month, a big change from an initial print that showed no growth.

Between the lines: Examining the makeup of the numbers reflects an economy going through a ton of change as consumers emerge from their homes and do stuff.

  • Clothing sales were up 3%. Sales at restaurants and bars were up 1.8%.
  • Meanwhile, durable goods that don’t leave the house — furniture, electronics, appliances, building materials — saw sales declines.

The intrigue: The economic shutdown of 2020 and the subsequent reopening are unprecedented, making it incredibly difficult to get a good measurement of the economy as it regains its legs.

  • This is reflected by the substantial revisions to the historical retail sales figures. Economists face similar challenges in their forecasts.

The bottom line: Monthly readings on consumer behavior will remain very noisy as the effects of stimulus checks wear off and the growing population of vaccinated Americans shifts its spending patterns. But longer-term trends point to robust retail activity.

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