Retail sales go flat, but the picture is brighter for the future, and the past

If you didn’t look at some key context from the headlines on today’s retail sales report, you might think that last week’s disappointing job growth might be the start of a bad trend.

U.S. retail sales unexpectedly stalled in April as the boost from stimulus checks faded, but an acceleration is likely in the coming months amid record savings and a reopening economy….

Economists polled by Reuters had forecast retail sales would rise 1.0%. Economists polled by Dow Jones had expected a more modest 0.8% increase.

Many qualified households received additional $1,400 checks in March, which were part of the White House’s $1.9 trillion COVID-19 pandemic rescue package approved early that month.

Then I looked at the actual report, and my worries stopped.

Advance estimates of U.S. retail and food services sales for April 2021, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $619.9 billion, virtually unchanged (± 0.5 percent)* from the previous month, and 51.2 percent (± 0.7 percent) above April 2020. Total sales for the February 2021 through April 2021 period were up 27.1 percent (± 0.5 percent) from the same period a year ago. The February 2021 to March 2021 percent change was revised from up 9.7 percent (± 0.5 percent) to up 10.7 percent (± 0.3 percent).

Well there’s your 1.0% growth, it just showed up in the March revisions. That's still an elevated amount of activity, and it was in a month when COVID and new unemployment claims were making short-lived comebacks. More recently, both have receded to longtime lows, unemployment claims especially.

The retail sales report also indicates that US consumers are making some adjustments to a COVID-diminished Spring. Note what went up and what went down in April.

Largest gainers, decliners in April retail sales report
Gainers
Autos and other vehicle dealers +3.1%
Bars/restaurants +3.0%

Losers
Big box/Gen merchandise stores -5.4%
Clothing stores -5.1%
Sporting goods/hobby, book stores -3.6%

Non-store retailers like Amazon also went down for the first time in a long time (-0.6%), reflecting the fact that people didn’t need to be tied to their homes so much. However, the losing sectors for April are still doing very well when you compare it to where we were before the pandemic, while bars and restaurants still aren't having the same sales that they had pre-COVID.

I’m anticipating many of the moderate numbers that we saw in April to jump back into good gains in May. Heck, even the CDC is saying COVID is fading and that masks aren’t as needed in as many places if you’re vaccinated (but they shouldn’t have sprung it all in one day, which gives the impression that things are back to normal when they still aren’t).

No matter how they turn out, the economic reports for May seem to be more important than we might have thought a couple of months ago. If they’re strong, then reduced COVID infections and lower layoffs are likely translating into the boom that we thought was starting in March, but now aren’t so sure. If the jobs and consumer spending figures remain muted in May, then we have real slack that’s continuing in the economy, and maybe our short-term inflation is becoming a bigger drag than I think it is today.

Meanwhile, enjoy the hints of Summer that are starting to show up in these parts. And if the patios in Madison yesterday are any indication, a lot of people are ready to break out now that it’s 70 degrees and they have the vax.