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Retail sales rebound in May, but the future looks Dim

Shoppers passed a hand sanitizing station at the Village Pointe shopping mall in Omaha Tuesday.
Shoppers passed a hand sanitizing station at the Village Pointe shopping mall in Omaha Tuesday. Nati Harnik/associated press/Associated Press

National retail sales rebounded in May as thousands of stores and restaurants reopened after lockdowns were lifted and federal stimulus checks and tax refunds fueled a burst of spending. But many of the stores and restaurants that welcomed back customers last month did so with fewer employees, reflecting a permanently altered retail landscape and an ominous sign for the economy as it tries to recover from the coronavirus pandemic.

Total sales, which include purchases in stores and online as well as money spent at bars and restaurants, rose 17.7 percent in May from the previous month, the Commerce Department said Tuesday. That followed a 14.7 percent drop in April, the largest monthly decline in nearly three decades of record keeping, and an 8.3 percent decline in March.

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Economists had expected a bounce back from April, when widespread business closures drove retail sales to their lowest level since 2013.

The rise in May is the largest monthly surge on record — drawing a celebratory Twitter post from President Trump — but the retail industry is nowhere near back to normal. Overall sales were still down 8 percent from February. Some categories, like clothing, were down as much as 63 percent from a year ago.

After more than a month of quarantine, May brought a tentative restart of brick-and-mortar retail across most of the country, with major chains like Macy’s and Gap reopening hundreds of stores. Some restaurants that had either closed or shifted their business to delivery and curbside pickup also reopened for in-person dining.

Driving some of the sales gains was warm weather, a sense of relief after weeks cooped up at home. and optimism from some that the worst of the pandemic could be over. But they were also lifted by stimulus money — totaling $1,200 per recipient, plus $500 per child — that will run out in the coming months, with no indications that Congress intends to pass another round of assistance.

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Sales at clothing and clothing accessories stores, which were hit especially hard by the closures, rose 188 percent in May, while spending at furniture and home furnishing stores jumped 90 percent. Still, clothing sales were down 63 percent from a year earlier, while furniture was down 22 percent.

Aneta Markowska, chief financial economist for investment bank Jefferies, said that while she had anticipated a jump in retail sales in May, it was off “a pretty low hurdle.” The bigger question was the sustainability of any improvement because spending was bolstered by tax refunds and government stimulus efforts.

“By the time we get into July, those tax refunds will probably be largely spent,” Markowska said, “and then you’re back to, hey, what’s the underlying employment growth? Because that’s going to have to be the key driver of spending going forward.”

Major apparel chains and malls have been aggressively pushing to reopen as quickly as legally possible to recoup some of their losses.

Some retailers have reported that their efforts are paying off. Kohl’s said last month that its reopened stores were about 50 percent to 60 percent as productive as they would typically be. Gap, which owns Banana Republic, Old Navy, and Athleta, said this month that its reopened stores in North America were generating sales at nearly 70 percent of their performance last year.

But at the same time, many shoppers are encountering an experience that’s very different from what they are accustomed to. There may be long lines outside stores because only a limited number of people are allowed inside at a time. Changing rooms are closed in many places, forcing shoppers to approximate sizes and inevitably generating more returns. For some, shopping is simply less fun and far more transactional in the pandemic era.

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