U.S. retail sales skyrocket; biggest one month increase in history

Economist - 'This may very well be the shortest, but still deepest, recession ever.'

Posted: Jun 16, 2020 10:24 AM

BALTIMORE (AP) — U.S. retail sales jumped by a record 17.7% from April to May, with spending partially rebounding after the coronavirus had shut down businesses, flattened the economy and paralyzed consumers during the previous two months.

The government’s report Tuesday showed that retail sales have retraced some of the record-setting month-to-month plunges of March (8.3%) and April (14.7%) as businesses have increasingly reopened. Still, the pandemic’s damage to retail sales remains severe, with purchases still down 6.1% from a year ago.

Last month’s bounce-back comes against the backdrop of an economy that may have begun what could be a slow and prolonged recovery. In May, employers added 2.5 million jobs, an unexpected increase that suggested that the job market has bottomed out. Still, a big unknown is whether early gains in job growth, retail sales and other areas can be sustained over the coming months or whether they may plateau at a low level.

“This may very well be the shortest, but still deepest, recession ever,” said Jennifer Lee, a senior economist at BMO Capital Markets. But she added that it's “not likely that we’ll see a repeat in June as this is pent-up demand unleashed in one month.”

May's rebound was likely aided by the $3 trillion in rescue money that the federal government has provided to companies and households. Retail sales would need to surge by an additional 9% to return to their level before the pandemic.

Any sustained recovery, though, will hinge on an array of factors: The path of the coronavirus, how willing consumers are to shop, travel and congregate in groups, how many businesses manage to stay open and rehire many workers and whether the government provides additional support.

"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," said Gus Faucher, chief economist at PNC Financial Services. “It depends on a lot of factors outside of the economics.”

The virus-induced recession not only diminished spending in most sectors of the economy. It has also accelerated shifts in where people shop and what they buy. The changes forced by the coronavirus have aided online retailers and building materials stores and other outlets that stayed open during the outbreak. Other businesses are facing persistent financial strains.

Sales at non-store retailers, which include internet companies like Amazon and eBay, rose 9% in May after posting growth of 9.5% in April. They are up a sizable 30.8% from a year ago.

Building materials stores enjoyed a monthly gain of 10.9% last month and annualized growth of 16.4%. Grocers have posed a 14.4% annual sales increase, reflecting fewer people eating out at restaurants because of the pandemic.

Other sectors in retail posted spectacular growth in May yet still face an uncertain future given the blows they absorbed in March and April. Clothiers achieved a stunning 188% monthly gain but still remain down 63% over the past 12 months. Furniture store sales surged 90% last month, but they're still down more than 21% on the year. This same pattern holds for restaurants, electronics stores, department stores and auto dealers.

Retail sales account for roughly half of all consumer spending, which fuels about 70% of total economic activity. The rest of consumer spending includes services, from cellphone and internet contracts to gym memberships and child care.

Nearly 80% of small retailers and restaurants tracked by the scheduling tool Homebase that were closed in mid-April have since reopened. Yet these smaller businesses remain under pressure. Their stresses in part reflect changes emerging as social distancing has become essential and shopping habits evolve.

One such retailer, CPW, a women’s clothing store, has been in business for 30 years on Manhattan’s Upper West Side. A three-month shutdown resulting from the virus meant the store retained only 20% to 30% of its sales as the owner, Linda Wolff, packed and delivered orders to customer homes. Though CPW reopened for curbside pickup a week ago, Wolff said she hasn’t rung up a single such sale.

“This is my heart and soul,” she said. “I am exhausted from all the worrying.”

Some national chains, by contrast, say they have so far avoided their worst fears. Macy’s CEO Jeff Gennette has said that his company’s reopened stores are regaining 50% of their typical business. Teen retailer American Eagle Outfitters is faring even better, averaging roughly 95% of its normal sales levels.

But analysts caution that some of the gains thus far probably reflect the impact of temporary government aid and expanded unemployment benefits in the face of a deep recession. The jobless rate is a historically high 13.3% by the government’s standard measure and an even worse 21.2% by the broadest gauge of unemployment. For now, Americans are spending disproportionately more on essentials and less on luxuries.

The lockdowns sent many mall-based chains further into peril. These retailers furloughed workers, slashed costs to preserve dwindling cash reserves and, in the cases of Neiman Marcus, J.Crew and JC Penney, filed for bankruptcy protection.

These troubles have contrasted with renewed strength for Walmart, Target and Home Depot, which were deemed essential businesses from the start and were allowed to remain open.

For a group of 35 non-essential retailers, including department stores and jewelry chains, combined losses reached $8.7 billion for the three-month period that ended in May, according to GlobalData Retail. That compares with their combined profit of $2.5 billion in the year-ago period.

Far better off were essential retailers, including dollar chains, discounters and food stores. For that group, profits reached $8.9 billion for the quarter, down only slightly from $9.1 billion from the year-ago period.

Coresight Research, a retail research firm, expects between 20,000 and 25,000 stores in the United States to close this year, about 60% of them in malls. That’s up from the firm’s previous estimate in mid-March of 15,000 closings, and it would surpass the record 9,000 stores closures last year. In the past week, Zara, Children’s Place and Signet Jewelers all announced hundreds of store closures and stressed the rising importance of their online presence.

Minnesota Coronavirus Cases

Data is updated nightly.

Cases: 489116

Reported Deaths: 6614
CountyCasesDeaths
Hennepin1014901592
Ramsey43327810
Dakota36619394
Anoka33496391
Washington22208262
Stearns18822202
St. Louis14887265
Scott13403107
Wright12609116
Olmsted1185990
Sherburne878574
Carver787641
Clay695588
Rice677691
Blue Earth601035
Kandiyohi581274
Crow Wing523582
Chisago501745
Otter Tail486071
Benton450990
Winona419749
Mower410831
Douglas394568
Goodhue389069
Nobles387247
Polk345063
McLeod341250
Beltrami338951
Morrison327747
Becker314842
Itasca314646
Lyon313845
Isanti309456
Steele303611
Carlton300449
Freeborn286424
Pine283216
Nicollet262441
Todd249730
Brown248237
Le Sueur238120
Mille Lacs229447
Cass221224
Waseca210417
Meeker208134
Martin190829
Wabasha18733
Roseau181017
Hubbard161041
Houston158214
Dodge15404
Renville152640
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Pennington138716
Chippewa136935
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Marshall78615
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Grant4928
Norman4798
Unassigned44768
Mahnomen4437
Kittson41021
Red Lake3615
Traverse3115
Lake of the Woods2221
Cook1190

Iowa Coronavirus Cases

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Cases: 337676

Reported Deaths: 5494
CountyCasesDeaths
Polk52087560
Linn19512317
Scott17167212
Black Hawk14970293
Woodbury13847214
Johnson1317075
Dubuque12450196
Dallas1022593
Pottawattamie9897146
Story965045
Warren514976
Clinton502684
Cerro Gordo501383
Webster495788
Sioux480369
Marshall465273
Des Moines428461
Muscatine426393
Buena Vista413237
Wapello4059110
Jasper387767
Plymouth368978
Lee354653
Marion341571
Jones285155
Henry279837
Bremer270555
Carroll266948
Crawford253635
Boone244330
Benton241154
Washington239547
Mahaska215746
Jackson210339
Dickinson204240
Tama203065
Kossuth198655
Delaware186240
Clay184425
Winneshiek183628
Fayette179335
Page178119
Buchanan177829
Wright174531
Hamilton173942
Cedar172723
Hardin170239
Harrison167670
Clayton160254
Butler159331
Mills148520
Floyd148141
Poweshiek148030
Cherokee146236
Lyon145741
Allamakee144848
Madison143218
Iowa140723
Hancock138030
Grundy132430
Winnebago130531
Calhoun129611
Cass129651
Jefferson128634
Appanoose123247
Louisa122644
Mitchell120740
Chickasaw119915
Union119331
Sac118818
Shelby117634
Emmet115340
Humboldt113725
Franklin109719
Guthrie109628
Palo Alto101721
Howard99722
Unassigned9720
Montgomery96936
Clarke95120
Keokuk92429
Monroe90028
Ida81832
Adair81630
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Davis76623
Monona76527
Greene73110
Lucas72221
Osceola68315
Worth6678
Taylor64112
Decatur5719
Fremont5619
Van Buren53718
Ringgold50620
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Adams3194
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