U.S. Retail Sales Rebound After Historic Slump

Nice spike but still well below pre-COVID levels
I’m skeptical the spike will continue back to normal
How much of the spike is pent up demand?
How sustainable is that spike?
Time will tell …

Following an unprecedented plunge in April, U.S. retail sales rebounded sharply in May, according to preliminary figures released by the U.S. Census Bureau on Tuesday. Total retail and food services sales amounted to $485.5 billion in May, up 17.7 percent from the previous month, but still 6.1 percent below last year’s May figure.

Due to the widespread lockdown instated to contain the spread of COVID-19, retail sales had plunged 14.7 percent in April, following an already unprecedented 8.2 percent drop in March. To put this in perspective, the highest drop prior to March 2020 had occurred in November 2008, when retail sales declined by less than 4 percent at the height of the financial crisis. As the following chart shows, retail sales have very rarely dipped significantly in the past, with the financial crisis being the most notable exception of the past three decades.

The May rebound was led by those stores hit hardest by the shutdown in the first place, with clothing store sales up 188 percent over April and other specialty stores also seeing high double digit increases in sales. While the quick bounce back in consumer spending is certainly encouraging, it needs to be noted that spending levels are still below pre-crisis levels, and significantly so for many types of retailers. Clothing store sales were still 63 percent below last year’s level in May for example, despite the aforementioned spike in sales.