Retail Sales Rebound in May




The U.S. Retail Sales Report measures the U.S. retail industry each month. The U.S. Census Bureau surveys 4,900 to collect retail sales data. It shows the total sales and the percent change for that month. It also reports on the percent change in year-over-year (YOY) sales for the last 12 months.

Retail sales signal trends in consumer spending. It drives almost 70% of economic growth.1 The industry supplies 52 million jobs.2 In addition to retail, personal consumption expenditures include services like housing and health care. 
Current Statistics

U.S. retail sales rose by 7.5% in June 2020.3 Shoppers returned to reopened stores that had closed in April to keep people safe during the coronavirus pandemic.

YOY retail sales were down 8.1%.3 That's a far cry from the 3% retail sales growth generated by a healthy economy.

Clothing store sales grew 105.1% for the month, although still down 57.3% for the year. Furniture store sales rose 32.5%, but were still 29.7% lower than last year. Sporting goods and hobby store sales increased by 26.5%, down 9% YOY.

Department stores rose by 19.8%, although still down 27.7% for the year. Many well-known department stores had declared bankruptcy in May due to high debt entering the pandemic.4 These included J. Crew, JCPenney, and Neiman Marcus.5 6 7 These stores plan to remain in business.

Restaurant and bar sales were up 20%, as many reopened inside dining with social distancing. Their sales were 38.8% lower than last year.

Gas station sales rose by 15.3%. The Census Bureau doesn't adjust its statistics for inflation. Oil prices drive 54% of gas prices.8 The latest oil price forecast is for slightly higher prices.9

Drug stores, an essential service, only saw an increase in sales of 3.5%. They are down 8.1% for the year. Auto dealers' revenue was up 8.7%. Building material and garden supply store sales fell by 0.3%.

Grocery stores, an essential service, saw sales drop by 1.6% in June. That's still a 13% annual increase.

Online sales dropped by 2.4% in June, but it's still 24.9% higher than last year.
The Retail Sales Report Predicts Economic Growth

Retail sales are used to predict consumer spending trends. That's because the report comes out monthly. U.S. economic growth, as measured by gross domestic product, is reported quarterly. Therefore, the retail sales report is a more current measurement of economic health.

You can use the retail sales report to predict GDP before that news comes out. Keep in mind that the retail sales report doesn't adjust for inflation, while GDP does.10

To predict GDP, look at year-over-year retail sales. 

GDP is an annualized number. GDP growth compares this annualized figure to the prior year. 

Keep in mind that GDP growth uses real GDP figures. They eliminate the effects of inflation. The YOY retail sales reports use nominal GDP figures. GDP growth reports and YOY retail reports could have significant differences if inflation is very high or if there is deflation. 

When using the retail sales report for forecasting, you should also look at other statistics. Most importantly, look at orders for durable goods. That's another great leading economic indicator.11 

About 20% of annual retail sales occur during the holiday season.

Pay attention to forecasts for specific holiday sales. The National Retail Federation surveys shoppers to find out how much they plan to spend on the major holidays. The report on Halloween spending provides early clues for the holiday shopping season. The NRF also reports on retail sales for Valentine's Day, Mother's Day, Father's Day, and Back to School.12 
Retail Sales Outlook

In March 2020, the National Retail Federation predicted that the industry would lose $430 billion in revenues in the third quarter of 2020.13 At least 630,000 non-essential retail outlets closed during the pandemic.14 Simon, the largest U.S. mall operator, closed over 200 shopping centers.2

In February 2020, the NRF had predicted 2020 retail sales would grow between 3.5%-4.1%.15 That was before most states issued shelter-in-place orders.

Jan Rogers Kniffen, a retail industry consultant, estimated that 30 well-known brands might be forced to file for bankruptcy protection.13 Many retailers will have trouble meeting loan obligations. Apparel retailers will have a hard time selling out-of-season apparel. They may have to cancel orders with manufacturers.

Most retailers will gradually recover once the shelter-in-place orders are lifted. The exception could be those, like indoor dining, that can't institute social distancing. A real recovery won't occur until a safe and effective vaccine is developed. In this pandemic, the future of retail depends on a virus.

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