Record retail sales growth! But still not close to being back to normal

One of the real indicators as to how much we climb out of the COVID-19-induced hole will be retail sales. Today’s release for May would tell us if the recovery from the depths of April was going to be faster or slower, and if people were willing to come out and spend in general.
And the numbers surprised in a very positive way.

Sales at U.S. retailers roared back in May as the economy started to reopen and claw its way out of what’s likely to have been the shortest and deepest recession in American history.

Retail sales jumped a record 17.7% last month, the government said Tuesday. Economists polled by MarketWatch had forecast an 8.5% increase.

Sales had tumbled by a record 14.7% in April and 8.2% in March, revised statistics show.

So May looks like a pretty good month for the economy in general, with the 2.5 million jobs added back and other statistics indicating that we came off the bottom that we hit in April.

But just like with jobs, while it’s a nice recovery in retail spending for May, it still is well below where we were at the start of 2020, with “core” retail sales down more than 6% since January, and more than 8% overall.

I also note this report from CBS Marketwatch which says that Americans didn’t use their one-time stimulus checks from April to buy luxury items, but mostly used it to stay afloat with consumer staples.

Nearly one-third (30%) of people said they used their stimulus checks to pay bills, according to a survey released this week, another sign that Americans are struggling to make ends meet, particularly with more than 38 million people filing for unemployment since mid-March.

Those bills — including for cellphones, utilities, cable TV and rent — are the No. 1 priority, even more than purchasing essentials and “relief spending” on apparel, televisions, video games, sporting goods and toys at Walmart, Costco, and Target.

“It’s alarming to look at how many Americans used these funds to keep a roof over their head and pay for necessities considering the federal government has not provided clarity about another round of stimulus payments being provided in the near future,” according to the report by YouGov.

If you look at the types of retail businesses that kept (and gained) consumers since the COVID-19 pandemic broke out, you’ll see that they are generally the types of businesses that stayed open through the pandemic. And online (non-store) retailers are in a boom as people try to avoid going out to get their items.

It’s interesting to see that the big increases that big-box and grocery stores had in March have settled down since then. On the flip side, a couple of bigger-ticket “consumer confidence” sectors did have a bounce back in May, particularly cars and auto parts, and furniture stores.

But while groceries stores are still having a lot more business compared to January, autos and furniture stores are still well below where they were at the start of 2020.

There are also some areas that haven’t recovered much at all, even in May. This includes clothing stores, and electronics stores, gas stations, and bars and restaurants.

Gas stations and bars and restaurants are easy enough to figure – people are going out less, and fewer eating/drinking establishments were open in May. But that those brick-and-mortar stores indicate that the secular trend of people buying items online has been put into overdrive as COVID-19 keeps people at home.

And you also have to wonder how many of those already-struggling stores survive the next few months. It sure seems like we will have even more empty storefronts in our communities over the coming months.

Without a doubt, the May retail sales increase is a big step toward getting our economy out of the abyss it fell into in March and April. But growth needs to continue in June, July and August, or else the “V-shaped recovery” that so many hopium addicts are counting on will quickly become a Nike swoosh (where it take a few years to get back to our peak).

And if Americans were just paying the bills when they get an extra check from Uncle Sam, you have to wonder how they’ll be able to continue increasing their spending if they don’t much else from the Feds in the coming weeks. Especially if most of the 19.5 million jobs lost don’t come back any time soon.

That would turn May’s record increase in retail sales into a one-time blip. And if people cut back and/or have more financial issues as the money from the Feds is cut off, then the hopium types are going to look like this very soon.