The May retail sales report will peel back the curtain on the health of the U.S. consumer amid one of the worst global pandemics in modern history. The consumer is expected to have rebounded following April’s record plunge in retail sales. While COVID-19 likely put some pressure on consumer spending during May, economists predict online sales maintained their strength. Even spending in the beaten down core components are expected to have rebounded in May.
Economists surveyed by Bloomberg expect headline retail sales rose 8%, up from a 16.4% decline in April. Meanwhile, retail sales excluding the volatile auto and gas components likely jumped 5% in May, up from a 16.2% plunge in April.
“As many states continued to ease restrictions on resident mobility and nonessential business activity, various high-frequency estimates of consumer spending data indicated solid increases in major discretionary categories in May following historical declines in April,” Nomura economist Lewis Alexander said in a note June 12.
Alexander pointed out that, consistent with recent data from WardsAutos, sales at auto and auto parts dealerships likely rebounded double digits. However, spending at restaurants is expected to have rebounded only modestly, according to Alexander.
“Although data from OpenTable, an online restaurant booking service, indicated some improvement in seated diner volume, sales at restaurants were likely weaker than the seasonal ramp-up in sales during late spring, weighing on the seasonally adjusted estimate.”
Within core components, consumer spending online rose 8.4% and fell 13.2% at grocery stores in April. Sales at department stores sank 28.9%, furniture stores saw a 58.7% drop in spending, sporting goods sales fell 38%, sales at electronics stores tumbled 60.6% and spending at clothing retailers plummeted the most at 78.8%.
Meanwhile non-core components also saw some hefty declines in activity in April. Auto and auto parts sales plunged 12.4% and gas sales fell 28.8%. Sales from food services was down 29.5% and spending on building materials decreased 3.5%.
Credit Suisse economist James Sweeney argued that while retail sales in May will have rebounded from April’s sharp declines, the recovery will be gradual.
“Consumer spending should start to recover in May as the country emerges from nationwide lockdown. However, the recovery will only be gradual as reopening happens in phases and consumer behavior shifts. With confidence still depressed and the labor market impaired, consumption is likely to take years to recover despite recent fiscal relief helping to support household income,” Sweeney wrote in a note to clients June 11.
Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.
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