As shoppers return, retail sales up 17.7%

May’s jump seen as partial rebound

BALTIMORE — American shoppers ramped up their spending on store purchases by a record 17.7% from April to May, delivering a dose of energy for retailers that have been reeling since the coronavirus shut down businesses, flattened the economy and paralyzed consumers during the previous two months.

The government’s report Tuesday showed that consumers’ retail purchases have retraced some of the record-setting month-tomonth plunges of March (8.3%) and April (14.7%) as businesses have increasingly reopened. Still, the pandemic’s damage to retailers remains severe, with purchases still down 6.1% from a year ago.

Last month’s bounce-back by consumers takes place

against the backdrop of an economy that may have begun what could be a slow and prolonged recovery. In May, employers added 2.5 million jobs, an unexpected rise that suggested that the job market has bottomed out.

“This may very well be the shortest, but still deepest, recession ever,” said Jennifer Lee, a senior economist at BMO Capital Markets. But she added that it’s “not likely that we’ll see a repeat in June as this is pent-up demand unleashed in one month.”

Investors and President Donald Trump greeted the news with enthusiasm.

The return of shoppers last month was likely aided by the $3 trillion in stimulus money the federal government has provided to companies and households.

Any sustained recovery, though, will hinge on an array of factors: The path of the coronavirus; how willing people 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.

“The disruption caused by the pandemic has done strange things to our perception of numbers,” Neil Saunders, managing director of GlobalData Retail, wrote in a note to clients. “Usually, a 7.7% year-over-year decline in retail sales would be an unmitigated disaster - but in the context of everything that is going on, the outcome is palatable.”

SHOPPING HABITS CHANGE

The virus-induced recession not only diminished spending in most sectors of the economy, it 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.

Extending an ongoing shift in shopping habits, Americans last month stepped up their purchases at nonstore retailers, which include internet companies like Amazon and eBay, by 9% after increasing such purchases nearly 10% in April. This category of sales is up a sizable 31% from a year ago.

When consumers do make purchases at stores, they’re increasingly doing so for such items as buildings materials and groceries. Building-materials stores posted a monthly gain of 11% last month and yearover-year growth of 16%. Shoppers have increased their grocery purchases by an annual 14%, with fewer of them dining at restaurants because of the pandemic.

Shoppers last month vastly increased their spending in other categories, too, though some of these sectors still face a dim future given the blows they absorbed in March and April. Clothing purchases soared 188% from April to May but remain down 63% over the past 12 months. Though consumers ramped up their spending at furniture stores by 90% last month, sales remain down more than 21% year over year. The same pattern holds for restaurants, electronics stores, department stores and auto dealers.

At Adeline, a women’s clothing boutique in Dallas, sales have been steadily rising since reopening the first week of May, with shoppers stocking up on summer clothing and dresses for graduation parties.

“The first couple of weeks after we reopened were slow, but it keeps picking up as the weeks go by,” said owner Graeme Gehring. “Now we’re super busy every day. People are excited to buy cute clothes.”

Americans’ retail purchases account for roughly half of all consumer spending, which fuels about 70% of total economic activity. The rest of their spending includes services, from cellphone and internet contracts to gym memberships and child care.

Nearly 80% of small retailers and restaurants tracked by the scheduling tool Homebase that were closed in mid-April have since reopened. Yet these smaller businesses remain under pressure. Their stresses in part reflect changes emerging as social distancing has become essential and shopping habits evolve.

Macy’s chief executive Jeff Gennette has said that his company’s reopened stores are regaining 50% of their typical business. Teen clothing retailer American Eagle Outfitters is faring even better, averaging roughly 95% of its normal sales levels.

But analysts caution that some of the gains in Americans’ retail spending thus far probably reflect the effect 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 21.2% by the broadest gauge of unemployment. For now, Americans are spending disproportionately more on essentials and less on luxuries.

SOME RETAILERS IN PERIL

The lockdowns sent many mall-based chains further into peril. These retailers furloughed workers, slashed costs to preserve dwindling cash reserves and, in the cases of Neiman Marcus, J.Crew and J.C. Penney, filed for bankruptcy protection.

In the past week, Zara, Children’s Place and Signet Jewelers all announced hundreds of store closures and stressed the rising importance of their online presence.

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.

Meanwhile, industrial production rose in May by less than forecast after a record decline a month earlier. Output at factories, mines and utilities increased 1.4%, compared with a median projection for a 3% gain, Federal Reserve data showed.

“Recently, some indicators have pointed to a stabilization, and in some areas a modest rebound, in economic activity,” Fed Chairman Jerome Powell said Tuesday in testimony delivered by videoconference before the Senate Banking Committee. “That said, the levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery.”

While his White Electric Coffee shop in Providence, R.I., was closed, Tom Toupin took out a loan to keep paying his employees. He also sold a special “Stay at Home” brew online, donating

20% of the sales to the state’s covid-19 relief fund.

In preparing to reopen this month, Toupin spent about $1,000 on a device that enables contactless payments and reconfigured the front counter and register to create more distance between employees and customers.

But in the first few days after reopening, the shop had about 60 customers a day, down from a typical 350. Toupin has had to waste food because he was not sure how many customers he would have, he said. Five people are working in the shop now, down from the usual team of a dozen.

“I was so excited to open up the shop again,” Toupin said. “I may have opened up sooner than I should have.” Information for this article was contributed by Josh Boak and Anne D’Innocenzio of The Associated Press; by Michael Corkery and Sapna Maheshwari of The New York Times; by Katia Dmitrieva and Olivia Rockeman of Bloomberg News; and by Abha Bhattarai and Rachel Siegel of

The Washington Post.