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What They Will Not Tell You About The Sudden Rise In May Retail Sales! (#GotBitcoin?)

No ones is talking about consumer, corporate or government debt reduction. Hmmm? What They Will Not Tell You About The Sudden Rise In May Retail Sales! (#GotBitcoin?)

Consumers spent their stimulus and extended unemployment benefits just as quickly they get it.

What happens when that money and extended unemployment runs out? Hmmm?

Sadly, total spending remained below levels before coronavirus.

Retail sales totaled $486 billion in May, a level well below prepandemic levels. February retail sales, for instance, were $527 billion.

Economists project it could take years for the U.S. economy to recover, and recent increases in coronavirus cases in more than a dozen states are casting a cloud over reopening efforts.

We are still so far below the prepandemic employment levels.

Supplemental unemployment benefits will likely be less generous after the current program expires at the end of July,”

U.S. Retail Sales Rose Record 18% In May

Sales rose following record declines during coronavirus lockdowns.

U.S. shoppers opened their pocketbooks at malls and auto dealerships in May as states eased restrictions to contain the novel coronavirus, boosting retail spending and adding another sign the economy is recovering from earlier lockdowns to contain the pandemic.

Retail sales, a measure of purchases at stores, at restaurants and online, increased a seasonally adjusted 17.7% in May from a month earlier, the Commerce Department said Tuesday. Data released separately pointed to other signs of life in May for an economy that went into a deep freeze in mid-March when the pandemic hit the U.S.

The Federal Reserve reported a moderate increase in May industrial production, including a pickup in manufacturing activity. A measure of builder confidence also improved.

The increase in retail sales was the biggest in records dating back to 1992. Still, retail spending remained below pre-pandemic levels in May, totaling $485.5 billion compared with $527.3 billion in February. From a year earlier, retail sales were down 6.1% in May.

“The U.S. consumer’s back big time and she’s spending,” said Craig Johnson, president of Customer Growth Partners, a retail consulting firm.

Stock markets jumped on the retail-sales news.

May’s month-over-month jump followed the largest monthly drop on record in April, a revised 14.7% decline. The swing in retail sales reflected the nature of the shock from the pandemic, where the coronavirus and related lockdown shut off an economy that previously was growing at a steady pace—and reopenings restored at least some demand for goods.

“The big question going forward is to what extent does employment snap back to precrisis levels,” a prerequisite for continued spending, said Joshua Shapiro, chief U.S. economist at MFR Inc. May’s unemployment rate dropped to 13.3% from 14.7%, and employers added 2.5 million jobs to payrolls, an improvement but far off the strong labor market before the pandemic.

Retail executives said government stimulus helped boost their sales in the end of April and May, and said continued spending will depend on the labor market’s recovery.

“We’ve had a solid start to May in the U.S.,” said Doug McMillon, chief executive of Walmart, the country’s largest retailer, discussing quarterly earnings last month. “But we believe stimulus spending has been a big driver, which we don’t anticipate staying at these levels.”

The government sent one-time stimulus checks of up to $1,200 a person out in April, and has separately provided financial help to businesses and workers.

The current $600-a-week boost to unemployment benefits, which started flowing to unemployed workers in April, expires at the end of July. Lawmakers and the Trump administration are at odds about extending them beyond the July 31 expiration date.

Federal Reserve Chairman Jerome Powell, speaking at a Senate hearing Tuesday, said the economy faces long-term damage from higher unemployment and a wave of small business failures due to the coronavirus pandemic, despite recent signs of improvement.

He anticipates the economy moving through three phases: shutting down, bouncing back, and stabilizing at a level of activity that is lower than before the pandemic. “It’s all quite uncertain but we appear to be entering that second phase of the economy reopening and businesses reopening and spending increasing,” Mr. Powell said, citing May retail sales as “more evidence.”

The U.S. economy still has a long way to go to recover—economists project it could take years—and recent increases in coronavirus cases in more than a dozen states are casting a cloud over reopening efforts.

May’s retail sales increase followed three straight months of declining retail sales, and offered a fresh sign that the worst of the economic shock from the pandemic likely occurred in late March and April when widespread shutdowns to contain the virus were in place across the country.

Consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of economic output, and retail sales account for about a quarter of all consumer spending. Social distancing, lockdowns and travel restrictions took an unprecedented toll on household spending in March and April.

Americans increased their outlays across the board in May, though the increase was driven by a 44.1% month-over-month rise in spending on motor vehicles, which make up about a fifth of retail sales.

Furniture and apparel sales, which fell precipitously during coronavirus lockdowns, posted strong gains, with sales at clothing stores rising 188% from the prior month and furniture sales jumping 89.7%.

Still, “the performance of individual sectors varies enormously,” said Neil Saunders, managing director of GlobalData Retail. Department and clothing store monthly sales fell versus last year as many remained closed or partially closed during the month. In addition, “extensive discounting, designed to clear down inventory, has also dampened sales values,” said Mr. Saunders.

Receipts at bars and restaurants jumped nearly 30% in May from April, but were down nearly 40% year-over-year.

Tuesday’s report tracked spending on mostly goods, and not services such as health care and travel. The figures weren’t adjusted for inflation.

As states allow businesses to reopen there are signs consumers are ready to spend, at least a little. Shoppers flocked to a T.J. Maxx store in Ann Arbor, Mich. on Monday, many eager to see and touch clothes, jewelry and shoes in real life.

Sheri Hudson, a retired 55-year-old who lives in Monroe, Mich., said she has been shopping more as stores reopened in recent weeks, including driving half an hour south to Ohio because stores opened there in May. “The whole time we were on house arrest, I went down there to do my shopping,” said Ms. Hudson, placing discounted designer clothes in her cart.

Some shoppers say they are being cautious with their spending, even though they are still employed. “I’ve cut back a lot because the economy is the way it is,” said Sue Vaandering, a 51-year-old from Brighton, Mich. She is buying essentials for her family such as food and household goods, and starting to buy more summer supplies, but is cutting back on clothes, she said.

Grocery store sales have remained broadly strong throughout the pandemic, and sales at home improvement, sporting goods and online retailers were up both on the month and the year.

In recent weeks, retail executives said that spending picked up at the end of April and into May, and that shoppers returned to reopened stores faster than expected. Private data also suggest that economic activity continued to rise in early June.

Updated: 5-15-2021

Retail Sales Dropped In May, Marking A Shift In Consumer Spending To Services

Retail sales dropped in May, marking a shift in consumer spending from big-ticket items to goods and services related to going out amid business reopenings and higher vaccination rates.

Consumers cut spending by 1.3% last month, trimming expenditures on autos, furniture, electronics, building materials and other items, the Commerce Department reported Tuesday. People spent more on such items throughout the Covid-19 pandemic but are now pulling back. Supply-chain disruptions and higher prices are also crimping sales of long-lasting goods.

Americans instead are spending more on services, which account for the bulk of economic output but are largely excluded from the retail-sales report. Spending on one service—restaurants and bars—rose 1.8% last month, sending food-service sales beyond pre-pandemic levels.

“The great pivot from goods into services has gained traction,” said Diane Swonk, chief economist at Grant Thornton. “As we shift into seeing and being seen, that whole process means spending on things that we didn’t spend on during the pandemic.”

Credit- and debit-card spending on many leisure services rose in May from April, according to data tracked by Earnest Research. In the four weeks ending June 2, spending at casinos rose nearly 17% from the four weeks prior, while consumers spent 9% more at theme parks and indoor-entertainment centers including bowling alleys, according to Earnest Research. Spending at gyms was up almost 4% over the same period.

Americans spent more on clothing and health and beauty products in May, categories of goods they had shunned for much of the pandemic but are likely turning to as they go out again. Online sales also dropped, signaling a pivot to more in-person shopping, Tuesday’s Commerce report showed.

The shift in retail habits came as government stimulus to households faded from earlier in the year and consumers encountered supply shortages and higher prices for products such as cars, lingering effects from the pandemic’s impact on the U.S. economy.

The Labor Department on Tuesday separately said its producer-price index rose 0.8% in May from the prior month.

The index represents a measure of prices that suppliers are charging businesses and other customers. Recent increases in PPI may indicate that businesses are passing on the higher production costs to customers, some of which are translating to higher retail price tags on store shelves across the country.

Retail spending in May was up about 28% when compared with the same month a year ago, when widespread restrictions were in place aimed at containing the coronavirus.

Spending, in part driven by trillions of dollars in stimulus, has helped propel the broader U.S. economy, which grew at a 6.4% annual rate in the first quarter. Economists expect consumer spending to continue powering the economic recovery this year, due to a convergence of factors.

For one, consumers have money to spend. Many are sitting on mounds of cash accumulated during lockdowns and multiple rounds of government stimulus. A strengthening job market offers another source of income support.

Consumers also have more opportunities and confidence to spend. States continue to reopen their economies. Higher vaccination rates and lower Covid-19 case counts are also spurring more people to leave their homes as concerns ease about contracting coronavirus.

However, the economy’s recovery continues to be uneven. Hiring gains are lagging behind gross domestic product growth as millions of workers remain sidelined due to factors such as expanded unemployment benefits, increased child-care responsibilities and fear of Covid-19. Consumer prices also surged last month from a year earlier, fueling concerns among some economists that the Federal Reserve won’t raise interest rates soon enough to contain inflationary pressures.

Vehicles are in short supply as a global computer-chip shortage has left car dealers with a dearth of inventory. As a result, auto sales fell last month. “If you don’t have products, you’ve got nothing to sell and that means lower revenues,” said Beth Ann Bovino, chief U.S. economist at S&P Global Ratings.

Manufacturers are scrambling to meet the surging demand. The Federal Reserve said industrial production rose 0.8% in May, with manufacturing gaining nearly 1% on production of consumer goods, business equipment and materials.

Sales at Modern Bungalow, a Denver-based furniture store, have slowed sharply recently after doubling from a year earlier for months after the pandemic hit, co-owner Danielle Sandusky said.

Newly minted home buyers needed furniture to outfit their spaces, and others who were stuck inside spent more on home goods in lieu of travel earlier in the pandemic, she added.

Ms. Sandusky said she expected some pullback as the economy reopened and consumers had more options for spending.

Supply-chain bottlenecks have posed additional challenges, she added. Many of Modern Bungalow’s suppliers are struggling to quickly deliver furniture to the retailer because of shortages of raw materials including lumber, foam and polywood, a recycled plastic.

A custom-made Amish dining set used to be built within eight to 10 weeks and then shipped to Modern Bungalow within one to two weeks. Now such a piece takes 14 to 16 weeks to build and two to three weeks to ship.

Upholstered furniture once arrived in six to eight weeks and now takes up to six months, Ms. Sandusky said. Longer wait times are deterring some customers from proceeding with purchases, she said.

“They’re saying, ‘Well, if it’s not going to be until October, November anyway, I’ll just wait. I’ll spend my money now on restaurants and travel and whatever and then I’ll see where I am in the fall and order something then,’ ” Ms. Sandusky said. She said she was hopeful that by the winter, “We’ll be back at it, and it’ll be normal.”

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