U.S. retail sales rise sharply above expectations in May

U.S. retail sales rose sharply by 17.7 percent sequentially in May, largely surpassing market expectations of a growth of 8 percent. Furthermore, the data for April was upwardly revised to a decline of 14.7 percent from a decline of 16.4 percent. The level of retail sales in May was 7.9 percent below where it was in February, prior to state lockdowns.

Motor vehicles and parts recorded a strong rise of 44.1 percent on a month-on-month basis. Building materials and garden equipment, gasoline stations and food services and drink places also saw strong recoveries in May.

Excluding these groups, retail sales grew 11 percent, the strongest rise since the series started in 1992. Sales of clothing and accessories drove the sharp rise, growing 188 percent on the month, followed by a 70.8 percent rise in furniture and household furnishing and electronics/appliances sales. Non-store retailers continued to make headway in May, rising 9 percent.

“While consumers readily loosened their purse strings last month, it is not an indication that things are back to normal. One-time checks and expanded unemployment insurance, provided by the CARES Act, has more than offset losses in employment income for most households. This helped support the rebound in retail sales. With expanded unemployment payments set to expire in July, households could see a significant drop in income if unemployed members have not returned to work”, said TD Economics in a research report.