Retail sales bounce back in May, but future looks dim
National retail sales rebounded in May as thousands of stores and restaurants reopened after lockdowns were lifted and federal stimulus checks and tax refunds fueled a burst of spending. But many of the stores and restaurants that welcomed back customers last month did so with fewer employees, reflecting a permanently altered retail landscape and an ominous sign for the economy as it tries to recover from the coronavirus pandemic.
Total sales, which include purchases in stores and online as well as money spent at bars and restaurants, rose
17.7 percent in May from the previous month, the Commerce Department said Tuesday. That followed a 14.7 percent drop in April, the largest monthly decline in nearly three decades of record keeping, and an
8.3 percent decline in March.
Economists had expected a bounce-back from April, when widespread business closures drove retail sales to their lowest level since 2013.
The rise in May is the largest monthly surge on record — drawing a celebratory Twitter post from President Donald Trump — but the retail industry is nowhere near back to normal. Overall sales were still down 8 percent from February. Some categories, like clothing, were down as much as 63 percent from a year ago.
After more than a month of quarantine, May brought a tentative restart of brick-and-mortar retail across most of the country, with major chains like Macy’s and Gap reopening hundreds of stores. Some restaurants that had either closed or shifted their business to delivery and curbside pickup also reopened for in-person dining.
Driving some of the sales gains were warm weather, a sense of relief after weeks cooped up at home and optimism from some that the worst of the pandemic could be over. But they were also lifted by stimulus money — totaling $1,200 per recipient, plus $500 per child — that will run out in the coming months, with no indications that Congress intends to pass another round of assistance.
“I think a lot of it is lockdown fatigue,” said Beth Ann Bovino, chief U.S. economist at S&P Global. “I would caution not to be fooled by this large gain. We still have a long way to go in repairing the economy.”
Sales at clothing and clothing accessories stores, which were hit especially hard by the closures, rose 188 percent in May, while spending at furniture and home furnishing stores jumped 90 percent. Still, clothing sales were down 63 percent from a year earlier, while furniture was down 22 percent.
Aneta Markowska, chief financial economist for investment bank Jefferies, said that while she had anticipated a jump in retail sales in May, it was off “a pretty low hurdle.” The bigger question was the sustainability of any improvement because spending was bolstered by tax refunds and government stimulus efforts.
“By the time we get into July, those tax refunds will probably be largely spent,” Markowska said, “and then you’re back to, ‘Hey, what’s the underlying employment growth?’ Because that’s going to have to be the key driver of spending going forward.”
The positive numbers in May also mask some of the intense strain on underlying businesses.
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 percent 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 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 would come, 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.”