A silver lining for retail sales
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.
- "Large upward revisions to April data means that the consumer pulse remains vibrant with headline & core retail sales still 18% above their pre-pandemic level!" Oxford Economics’ Gregory Daco exclaimed on Twitter.
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.