The U.S. Department of Commerce reported on Tuesday that retail sales fell below last month’s expectations as a sign of uneven recovery in U.S. consumers and changing spending patterns as the country reopened after the coronavirus pandemic. did.
The 1.3% decline in May followed the ups and downs of retail spending in the months.
After hitting a record low about a year ago, sales recovered sharply this spring, but fluctuated from month to month due to increased and decreased government stimulus and virus persistence. April data was revised on Tuesday, showing an increase of 0.9%.
Still, economists said the broader recovery is on track. Last month’s spending data does not show a fundamental weakness, but rather that consumers were likely to have spent everything they needed to upgrade their home fixtures and phones during the pandemic’s return. Now, as vaccination rates rise and people can go on adventures more safely, they are shifting their purchases to restaurants, accommodation and travel.
Beth Ambobino, US Chief Economist at S & P Global, said: “But there’s a reason I’m not worried.”
For one thing, purchases have risen to record levels in the last few months, well above what consumers were spending before the pandemic, Bobino said. Another factor that weighed on spending last month was the limited supply of cars in particular. May car sales fell 4%.
Automobile production is slowing due to a shortage of semiconductors. This is part of a global supply chain issue affecting a variety of products, including: Starbucks coffee flavor And timber. But this week’s government data also shows that car production recovered in May as supply chain problems eased. This should lead to increased sales this summer.
The retail sales report on Tuesday does not include travel or hotel spending, but credit and debit card data show that these sectors recovered significantly in May. According to an analysis by Bank of America, consumers spent 16% more on Memorial Day weekend nights than during their 2019 holidays.
Economists say consumers are undergoing a “rotation” of their unusual pandemic spending patterns. It began in the pandemic blockade month, with a significant increase in grocery purchases and a plunge in restaurant profits. As they stayed at home for longer, many worked on refurbishment projects, upgraded furniture and entertained with new electronics and sporting goods.
Last month showed another change. Furniture spending fell 2.1%, while electronics and electronics purchases fell 3.4%. Purchases at restaurants and bars increased by 1.8%. Consumers spent more on clothing and accessories last month. This partially reflects the need to dress up to return to the gradual reopening office after months of working from home. Department store sales increased 1.6%.
Ian Shepherdson, Chief Economist at Pantheon Macroeconomics, said the data aren’t very helpful in assessing the true health of consumers, as there are so many warnings in retail sales reports.
“The decline in today’s number headlines doesn’t tell us anything about the future,” Shepherdson wrote in a research note.
Still, much is at stake in US consumers, who are driving the broader US recovery. With the country open and more people vaccinated, the deviation from policymakers’ expectations that retail sales will continue to grow steadily is surprising to economists.
The federal government spent more than $ 1 trillion to prevent Americans from continuing to spend and closing stores and restaurants during the blockade during the pandemic.
Incentive payments have been successful in many ways. Last month’s spending was about 18 percent higher than pre-pandemic levels. Economists are currently watching to see if the end of the stimulus (the last check was shipped in mid-March) will lead to lower spending.
The Federal Reserve Board will release its June policy statement and economic forecasts on Wednesday, followed by a press conference with Central Bank Chair Jerome H. Powell. He could give the latest assessment of inflation, the labor market, and the overall economic recovery after a series of amazing data points like last month’s retail sales.
Meetings and remarks are carefully watched by investors looking for hints that the Fed is preparing to delay $ 120 billion in monthly government-sponsored bond purchases.
Bobino of S & P Global says one of the biggest tests for recovery will come this fall, when additional unemployment allowances have expired, school is reopening and parents are ready to return to work. I will. At that time, it will become clear whether stimulating retail spending will lead to sustainable job growth and business creation.
Another risk is that these early signs of inflation, primarily caused by supply problems, become more serious and encourage consumers to withdraw.
However, most economists are optimistic that spending will remain on an upward trajectory. Gus Faucher, Chief Economist at PNC Financial Services Group, predicted on Tuesday that retail sales would grow at a “moderate pace” in the near future as many American consumers were in good financial condition overall.
“Many household savings, normalization of supply chains, increased wealth due to rising stock prices and housing prices, improved labor markets, low interest rates and other positive aspects are negative aspects of rising prices and exhausted demand. It’s better than that, “he said.
Janna Smiarek Contribution report.
Retail sales fell in May, the latest sign of a bumpy recovery
Source link Retail sales fell in May, the latest sign of a bumpy recovery