U.S. retail sales are off slightly in May

May United States retail sales saw a sequential decline and an annual gain, according to data issued today by the United States Department of Commerce and the National Retail Federation (NRF).

Commerce reported that May retail sales—at $672.9 billion—were down 0.3% compared to April, while seeing an 8.1% annual gain, amid ongoing 40-year highs for inflation. And total retail sales, from March through May, saw a 7.7% annual gain.

Retail trade sales were down 0.4% annually, with gasoline stations up 43.2%, due to record-high prices, and food services and drinking places up 17.5%.

NRF said that in its calculation of retail sales, which excludes automobile dealers, gasoline stations, and restaurants, to focus on core retail, pointed to May retail sales being flat on a seasonally-adjusted basis compared to April and up 6.7% on an unadjusted basis annually, compared to April’s 0.4% sequential gain over March and 5.5% annual gain.

“There’s been little relief from inflation, and we expected some cooling off in sales in reaction to prices, NRF Chief Economist Jack Kleinhenz said in a statement. “There have been swings across sectors that reflect the impact of both higher prices and supply chain disturbances, and higher interest rates are expected to curb spending going forward. As inflation continues, consumers are looking for ways to stretch their dollars by saving less, tapping into savings accumulated during the pandemic and increasing their use of credit.”

NRF said its retail sales numbers saw a 5.4% unadjusted annual gain on a three-month moving average through May, with retail sales up 7.3% annually through the first five months of 2022.

NRF added that May retail sales saw gains in eight out of nine categories it tracks on an annual basis, while seeing declines in almost half of the categories it tracks on a sequential basis, including:
-Building materials and garden supply stores were up 0.2 percent month over month seasonally adjusted and up 8.8 percent unadjusted year over year;

• Online and other non-store sales were down 1 percent month over month seasonally adjusted but up 8.5 percent unadjusted year over year;
• Grocery and beverage stores were up 1.2 percent month over month seasonally adjusted and up 7.1 percent unadjusted year over year;
• Clothing and clothing accessory stores were up 0.1 percent month over month seasonally adjusted and up 6 percent unadjusted year over year;
• Health and personal care stores were down 0.2 percent month over month seasonally adjusted but up 5.8 percent unadjusted year over year;
• Furniture and home furnishings stores were down 0.9 percent month over month seasonally adjusted but up 2.3 percent unadjusted year over year;
• Sporting goods stores were up 0.4 percent month over month seasonally adjusted and up 1.2 percent unadjusted year over year;
• General merchandise stores were up 0.1 percent month over month seasonally adjusted and up 0.9 percent unadjusted year over year; and
• Electronics and appliance stores were down 1.3 percent month over month seasonally adjusted and down 4.3 percent unadjusted year over year

“As respectable as the numbers are, growth is now comfortably below the headline inflation rate which was 8.6% in May,” said Neil Saunders, Managing Director of GlobalData. “This means that overall volumes are in negative territory, showing that while the consumer still has spending power, this is neither unlimited nor unaffected by wider economic concerns. Indeed, the headline growth rate is flattered by inflation – especially in channels like gas stations where sales rose by 43.5% because of hefty rises at the pumps. This equates to American consumers having to find an additional $21.6 billion for gasoline compared to last year. Basically, more of the household budget is being spend on essentials and necessities which leaves less room for other things. Overall, the results from May do nothing to change our view that while retail growth is moderating it is witnessing a relatively soft landing on the sales front. There is no abrupt curtailment of spending and while there most certainly shifts in how and what people buy, these are relatively subtle and are somewhat masked by inflation. That does not mean retailers can relax completely. Weaker demand combined with higher costs will unravel many business models, especially on the top-line.”

Naveen Jaggi, President Retail Advisory Services, for industrial real estate firm JLL commented that the May 2022 retail sales showed consumers were more concerned about the high inflation pressures, which could account for the slight month over month dip.

“However, consumers are continuing a return to the office, summer travel plans are beginning, and the excitement continues to grow for warmer weather, so we can expect a rise in retail sales to pick back up over the course of the next couple months,” said Jaggi. “As consumers emerge from pandemic-related restrictions and summer has officially kicked-off, they crave experiential dining more than ever. Food services & drinking places saw a 17.5 percent increase YOY, which is impressive considering the restaurant segment took a huge hit during the pandemic. Restaurants are continuing their outdoor dining concept, creating a fun social and safe atmosphere for consumers. Consumers are craving social experiences, hence the rebirth of the ‘eatertainment’ concept, combining food, liquor, music and games in restaurant setting, and this concept saw a traffic surge 22 percent from April 2019 levels and more than 36 percent YOY, as stated in the JLL Q1 Outlook report.”