Retail Sales Almost Back to Pre-Pandemic Levels

Retail sales jumped by 7.5% in June, the Commerce Department reported on Thursday. Last month, businesses started to reopen again, and consumers were eager to spend. Purchases rose from $487.7 billion in May to $524.3 billion in June (sales reached $527.3 billion in February, before the pandemic set in). Consumer spending makes up about two-thirds of economic activity in the United States, and retail sales comprise about a quarter of that. 

Retail sales grew 17.7% monthly in May, after seeing ugly declines in March and April. The combination of social distancing, lack of travel or group activities, closed businesses, and layoffs cut off the spending spigot, leaving a lot of pent up demand. Headline sales were driven primarily by a pick up in auto sales, furniture, clothing, and electronics. 

The biggest increase came from vehicles. Auto sales rose 8.2% month over month, thanks in part to the Federal Reserve’s low interest rates. But spending on gasoline also saw a big jump. From May to June, gasoline sales gained 15.3%, as oil prices rose and more drivers returned to the road. Stripping out auto and gas numbers, retail sales improved by 6.7%, which I think is still quite respectable!

Sales grew 20% at bars and restaurants, a sector that was pummeled by the coronavirus.

Spending fell by 2.4% since last month at e-commerce establishments and 1.6% at grocery stores. This could be interpreted as another sign that things started to return to normal in June. Both of these sectors saw sales go through the roof when most everybody was stuck at home. The fact that spending is shifting back towards restaurants and brick and mortar establishments is good news.

Of course, we couldn’t talk about economic activity without mentioning the fine print. Towards the end of June, the coronavirus reared its ugly head. Cases are on the rise again, and that could dampen economic momentum. This comes at the same time that enhanced unemployment benefits are scheduled to run out. It’s nice to see that the economy turned around by so many measures in the spring, but I think the real test of sustainability will come this summer.