Retail sales in the United States increased by the most on record in May after two straight months of coronavirus-triggered sharp declines – the latest piece of evidence signalling that the recession triggered by the COVID-19 pandemic is either over or drawing to an end.
The report from the Commerce Department on Tuesday followed news earlier this month that the economy created 2.5 million jobs in May. Layoffs are also ebbing and manufacturing activity is improving, though production remains at very low levels.
Still, the record jump in retail sales recouped only a fraction of March and April’s decreases. Consumer spending is the engine of the US economy accounting for roughly two-thirds of the gross domestic product (GDP).
“The economy and retail sales have hit the bottom in May and we have a V-shaped first stage of recovery,” said Sung Won Sohn, a business economics professor at Loyola Marymount University in Los Angeles. “However, it will take quite some time to get back to anywhere near the levels of retail sales and economic activity we enjoyed around the turn of the year.”
Retail sales jumped 17.7 percent last month, the biggest advance since the government started tracking the series in 1992. Data for April was revised to show a record 14.7 percent drop in sales instead of the previously reported 16.2 percent. Economists polled by Reuters News Agency had forecast retail sales would rise 8 percent in May.
Retail sales fell 6.1 percent on a year-on-year basis in May.
Even with May’s surge, sales were still about 8 percent below their February level. The reopening of nonessential businesses last month after being shuttered in mid-March to slow the spread of COVID-19, the respiratory illness caused by the novel coronavirus, has seen Americans flocking to car dealerships and spending more on gasoline, apparel and at restaurants.
Receipts at car dealerships accelerated 44.1 percent last month after declining 12.3 percent in April. Sales at building material stores rose 10.9 percent. Receipts at service stations increased 12.8 percent. Sales at electronics and appliance stores soared 50.5 percent.
Receipts at clothing stores rebounded 188 percent last month. Sales at furniture stores soared 89.7 percent. Receipts at restaurants and bars advanced 29.1 percent. Spending at hobby, musical instrument and book stores vaulted 88.2 percent. All these categories had suffered record declines in sales in March and April.
Online and mail-order retail sales rose 9 percent.
Excluding automobiles, gasoline, building materials and food services, retail sales surged 11 percent in May after tumbling 12.4 percent in April. These so-called core retail sales correspond most closely with the consumer spending component of the gross domestic product report.
Economists expect consumer spending could decline as much as 50 percent on an annualised basis in the second quarter. That could result in GDP plunging at about a 48.5 percent pace in that period.
Consumer spending contracted at a 6.8 percent rate in the first quarter, the sharpest drop since the second quarter of 1980. The economy contracted at a 5 percent pace in the January to March quarter, the deepest contraction since the 2007 to 2009 Great Recession.
Despite signs of recovery in retail sales, record savings and the government’s historic fiscal package of nearly $3 trillion providing a cushion for consumers through one-time $1,200 checks and generous unemployment benefits, economists caution that consumer spending is not out of the woods yet.
Some parts of the country are experiencing a resurgence of COVID-19 infections, which could curtail consumer spending.