COVID-19 has decimated global demand as lockdowns materially re-shaped consumer and business behavior. Even as states have begun to re-open, significant questions remain about how demand could recover. The May retail sales print provided one of the first glimpses of that answer, rising 17.7% month over month and marking the largest monthly gain since data began in 1992.
Pent-up demand and an added boost from government stimulus helped fuel such a large gain. Each category of the report was positive in May, indicating broad-based increased demand for goods. As demand post-lockdown shifted away from discretionary spending items such as clothing and electronics, that trend appears to be reversing, with clothing sales in particular growing 188% in May.
However, as shown in the LPL Chart of the Day, despite the strong growth in May, several industries in the retail sales report are still making up ground versus their pre-COVID-19 levels:
“Consumers appear to be ready to shop as states continue reopening. We’ll be watching to see if the retail sales rebound is a one-off or if it shows that consumer spending is returning to create a sustained trend,” said LPL Financial Senior Market Strategist Ryan Detrick.
Coming off the heels of the May nonfarm payrolls beat, the rebound in retail sales may prove to be the start of the return to normalcy for the US consumer, but both data points will need to show further stabilization before we can sound the all clear.
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Retail sales measure the total receipts at retail and food services stores that sell merchandise and related services to final consumers. Data are collected from the Monthly Retail Trade Survey conducted by the U.S. Bureau of the Census. Retail sales cover both the durables and nondurables portions of consumer spending, which together typically accounts for about two-thirds of GDP, and is therefore a key element in economic growth.
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