But Still Down 8 Percent from February

Retail sales surged in May as expected, increasing 18 percent from April, as many businesses reopened and consumers ventured back out as states lifted restrictions on movement put in place because of the coronavirus pandemic. But although economic activity is beginning to recover, it is still down almost 8 percent from February, before the pandemic took hold; retail sales fell 8 percent in March and 15 percent in April. On a year-ago basis May sales were down 6.1 percent. 

Sales excluding autos were up 12.4 percent in May from April, as were sales excluding autos and gasoline. Control sales—retail sales excluding food service, autos, gasoline, and building supplies, and which go into consumer spending in GDP—were up 11 percent in May from April, and were back to their February level. On a year-ago basis control sales were up 2 percent in May. 

All major sales categories increased in May from April, and most had double-digit percentage gains. Sales of autos and parts surged 44 percent over the month, with gasoline sales up 13 percent as driving increased. Sales jumped 188 percent for clothing and accessories, 89 percent for furniture and home furnishings, 88 percent for sports and hobby stores, 51 percent for electronics and appliances, 29 percent for restaurants and bars, and 11 percent for building materials. Sales rose 9 percent for nonstore retailers (primarily online sales), 6 percent for general merchandisers, and 2 percent for in-store food and beverages. 

Consumer spending is coming back, but is still down significantly from earlier this year. State are gradually lifting restrictions on economic activity; some shoppers are feeling more comfortable venturing out; and stimulus efforts, including expanded unemployment insurance benefits and one-time stimulus payments, have provided a boost to incomes. In addition, labor income grew in May as businesses added 2.5 million workers on net. Extremely low interest rates are supporting purchases of big-ticket items. 

While the big increase in retail sales in May is encouraging, there is still a huge amount of uncertainty about the strength of the rebound. It will depend on a number of factors, including the path of the coronavirus, how willing consumers are to be in public, how many businesses manage to stay open and how many laid-off workers they rehire, and whether the federal government provides additional stimulus. PNC expects continued gains in consumer spending through the rest of 2020 and throughout 2021, but retail sales are not expected to return to their pre-recession level until 2022.