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The Commerce Department reported Tuesday that retail sales fell slightly last month, in another sign of the uneven recovery of the American consumer during the pandemic.
The 1.3 percent drop in May came after months of ups and downs in retail spending.
After dropping to record levels a year ago, sales rebounded sharply in the spring, swinging from month to month, driven by the tide and influx of government stimulus and the persistence of the virus. Data from April was revised on Tuesday to show an increase of 0.9 percent.
However, economists said the broader recovery is still on track. Rather than pointing to a fundamental weakness, spending data last month shows that consumers may have spent everything they needed to furnish their homes or upgrade their phones and change their buying patterns. Furniture spending fell 2.1%, while purchases of electronics and home appliances fell 3.4%.
With a growing portion of the country’s population vaccinated and infection rates declining, Americans are venturing out and spending more on restaurants, which rose 1.8 percent in May.
“Retail sales continue their downward journey,” said Jos Foucher, chief economist at PNC Financial Services Group, in a research note.
“Household spending will support the overall economic recovery, but growth will shift from goods to services as consumers resume eating out, taking vacations, going to the movies and concerts.”
Another factor that drove overall sales down last month was a nearly 4 percent drop in auto sales. Auto production has been slowed by a shortage of semiconductors, part of the global supply chain problems affecting a range of products such as Starbucks coffee flavors, furniture and wood. But government data this week also showed that auto production rebounded in May as supply chain problems eased, which should lead to more sales this summer.
Retail sales have been a closely watched measure of economic recovery during the pandemic. As researchers developed vaccines and states tried to control the virus, the federal government has spent more than $1 trillion during the pandemic trying to ensure Americans can keep spending and prevent stores and restaurants from closing.
The stimulus payments have paid off by many metrics. Retail sales, which saw a record decline at the start of the pandemic, have returned to pre-pandemic levels, albeit at times with hesitation. Economists are now watching whether the end of the stimulus money – the last checks sent in mid-March – will begin to test the recovery.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said some of the decline in the past month may have been driven by the end of stimulus. But he expects retail sales to return to the “upward trend” in June, as “the ongoing reopening convinces people to start draining their massive savings pile”.
“The major dips in today’s numbers don’t tell us anything about the future,” he said.
Similarly, Michelle Meyer, US economist at Bank of America, said last month’s retail sales, if any, “reduce consumer power.” I tracked credit card spending over the Memorial Day holiday, which was the last weekend of May.
Consumers spent 24 percent more on restaurants and 16 percent more on lodging than they did during Memorial Day in 2019, according to a Bank of America analysis. Housing was not recorded in the retail sales data released on Tuesday.
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