Shoppers opened their pocketbooks in May as states eased coronavirus-related restrictions on businesses and consumers, likely prompting a pickup in retail sales following record declines during lockdowns.
The May retail sales report from the Commerce Department, to be released Tuesday, is expected to offer another 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. Employers, for instance, added 2.5 million jobs last month, and the jobless rate fell to 13.3% from April’s 14.7%.
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.
Costco Wholesale Corp. ’s comparable sales, those from stores or digital channels operating at least 12 months, rose 9.7% in May. Sales of discretionary and nonfood items such as bedding, appliances and sporting goods “rebounded in May compared to recent months,” while food sales stayed strong, a Costco executive said on a prerecorded call to discuss monthly sales. Walmart Inc. and Target Corp. executives also said last month that spending picked up at the end of their most recent quarters in late April.
Economists surveyed by The Wall Street Journal expect that retail sales, a measure of purchases at stores, at restaurants and online, increased 7.7% in May from a month earlier. That would mark the strongest month-over-month increase in retail sales since records began in 1992, but following two months of record drops and at levels that would remain well below prepandemic levels.
Retail sales were $403.9 billion in April, more than 20% below the $527.3 billion recorded in February.
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.
“We still have so far to go,” said André Kurmann, associate professor of economics at Drexel University. “We are still so far below the prepandemic employment levels.”
“Stores can reopen to some extent, but how many people are going to come back is the big question,” he added.
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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.
Lindsey Piegza, chief economist at Stifel Nicolaus & Co., said she is watching to see how much consumers spent and on what in May, the third month of the pandemic-related disruptions in the U.S.
More retailers are offering new services such as curbside pick up of orders.
Photo: Gabriela Bhaskar for The Wall Street Journal“It’s going to be interesting to see exactly how families and individuals rearrange spending on a month-to-month basis,” she said, amid uneven business reopenings and hesitation about re-entering stores and malls.
Brendan Coughlin, head of consumer banking at Citizens Financial Group Inc., said at a Morgan Stanley virtual conference last week that debit-card spending has picked up after a coronavirus-related plunge.
“While the economy is not out of the woods, while the banking system’s not out of the woods, while our customers are not out of the woods, we are seeing some very encouraging return-to-life signs from our retail customer base,” he said.
Online sales have grown quickly during the coronavirus pandemic as more shoppers stayed home and more retailers offered new services such as parking lot pickup of online orders. Nonstore retail sales, which includes sales from online sellers such as Amazon.com Inc., grew 8.4% in April, compared with the previous month amid a steep decline in overall retail sales.
Economists say that while an increase in retail sales may offer signs of a turnaround it won’t reach prepandemic levels and isn’t a sign the impact from the pandemic is over.
They also expect the effect on personal income from trillions of dollars in government stimulus—including one-time payments of up to $1,200 and enhanced unemployment payments—will fade before the pandemic ends.
“The labor market should keep recovering, but support from stimulus payments will fade, some states may have to pause their reopening amidst new uptrends in Covid infections, and supplemental unemployment benefits will likely be less generous after the current program expires at the end of July,” Jim O’Sullivan, chief U.S. macro strategist at TD Securities, said in a note to clients Monday.
As states allow businesses to reopen there are signs consumers are ready to spend. Here, shoppers at a reopened mall in California earlier this month.
Photo: Watchara Phomicinda/Zuma PressWrite to Harriet Torry at harriet.torry@wsj.com and Sarah Nassauer at sarah.nassauer@wsj.com
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