DIpil Das
US Retail Sales: May 2022
Coresight Research’s measure of core retail sales is the unadjusted year-over-year change, excluding sales of gasoline, motor vehicles and parts. This metric performed better than our expectations as outlined in our latest Leading Indicators of US Retail Sales Report, growing 6.5% year over year. Furthermore, the Census Bureau’s adjustments to April retail sales estimates revised growth downward, from 6.4% year-over-year growth to 5.5%. May’s 2022 retail sales estimates are against very strong May 2021 retail sales data when pandemic-driven stimulus checks proved a boost to retail spending. In a more positive light, the 6.5% growth on top of the 17.3% growth in May 2021 indicates that retail sales are healthy. However, the retail sales estimates released by the US Census Bureau do not account for inflation. In May, consumer prices grew 8.6% from a year ago, reaching a new 40-year high, accelerating from April’s 8.3% growth in prices. Price increases are being driven by essential goods, such as household energy, gasoline and food at home. While sales at gasoline stations are not included in our metric of retail sales, the price of gas is putting pressure on consumers’ ability to spend in discretionary categories. We estimate our retail-only inflation metric to have been 7.3% in May. This metric strips out some of the core categories driving overall inflation and focuses on price increases within relevant retail-specific sectors, each of which are weighted to represent their share of total retail sales. A leveling off of our retail-only inflation metric (while overall inflation climbed further) between April and May may underscore a slightly reduced retail demand amid rising prices of essentials and a continued shift back to spending on services in 2022. With our inferred retail-only inflation metric at 7.3%, 6.5% overall growth in retail sales in May implies consumers are buying fewer items at the store and there was a real terms sales decline of around 0.8%. We estimate that May was the third consecutive month to see a real-terms total sales decline, year over year. May’s acceleration in consumer price increases means that despite interest rate hikes, inflation has yet to cool off. Consequently, in early June, the University of Michigan consumer sentiment index declined to its lowest recorded reading in history, to a reading of 50.2. On June 15, the Federal Reserve Bank hiked interest rates by 75 basis points, the largest such hike since 1994, and a more aggressive monetary policy action than its previous 50-basis point hike plan laid out earlier in the year.Figure 1. US Total Retail Sales ex. Gasoline and Automobiles: YoY % Change [caption id="attachment_149619" align="aligncenter" width="700"]
Data are not seasonally adjusted Source: US Census Bureau/Coresight Research [/caption] Seasonally adjusted retail sales, including automobiles and gasoline, grew slower at 6.1% from a year ago. Still, the 6.1% growth represented a slight acceleration from the revised April estimate. Sales at gasoline stations are artificially surging as a result of higher prices. However, sales at motor vehicles and auto parts dealers continued to decline year over year, reflecting the impact of the combination of the global microchip shortage and rising prices of new and used vehicles.
Figure 2. US Total Retail Sales incl. Gasoline and Automobiles: Seasonally Adjusted YoY % Change [caption id="attachment_149595" align="aligncenter" width="700"]
Data are seasonally adjusted Source: US Census Bureau/Coresight Research [/caption] Sales Marginally Decline Month over Month On a month-over-month basis, seasonally adjusted sales (excluding gasoline and automobiles) shrunk marginally by 0.1% in May. The sales decline reflects a weakening in discretionary consumer spending as consumers are being forced to spend more of their income on essentials such as food and gas. Additionally, April’s month-over-month change was revised down from 0.8% growth to 0.4%.
Figure 3. US Total Retail Sales ex. Gasoline and Automobiles: MoM % Change [caption id="attachment_149596" align="aligncenter" width="700"]
Data are seasonally adjusted Source: US Census Bureau/Coresight Research [/caption] Retail Sales Growth by Sector Overall retail sales growth stayed marginally healthy. Some notable sectors are witnessing sales growth slow as consumers grapple with the fastest rising prices in four decades, while two notable sectors witnessed sales declines.
- Sales at electronics and appliance stores saw a third consecutive month of sales declines. Year over year, sales declined by 4.3%, an acceleration from April’s revised 3.6% decline in sales.
- General merchandise stores exhibited only marginal sales growth. Sales grew 0.9% year over year. Notably, the department store subsector posted a sales decline of 1.5%, a sharp drop from April’s 6.7% growth in sales.
- Sales of building material and garden supplies rebounded after a slow April. Sales grew 8.8% from a year earlier in May, a healthy recovery from sales declines in April.
- Relatedly, sales of furniture and home-furnishings grew slower. Sales grew 2.3% from a year ago, little changed from April’s revised 2.2% growth.
- Food and beverage stores sales nominally grew 7.1% from the previous year, while grocery stores did a bit better, growing 7.9% from the previous year. Still, neither of these two sectors are seeing sales outpace food at home price increases, which grew a strong 11.9% from a year ago, as sales volumes continue to decline.
- Clothing and clothing accessory store sales stayed healthy. In May, sales grew 6.0% which was slower than April’s 12.1% growth.
- Miscellaneous store retailers continue to see the strongest sales growth of any sector throughout 2022, growing sales 26.9% from a year earlier, an acceleration from April’s 18.8% sales growth.
- Nonstore retailers, a proxy for e-commerce spending, stayed healthy growing sales 8.5% year over year.
- Sales at sporting goods, hobby, musical instrument and bookstores grew 1.2%, an improvement from April’s sales decline of 0.9%.
- While it is not included in our definition of retail sales, the Census Bureau’s report of a 16.8% year-over-year rise in sales at food service and drinking establishments in May reflects the sustained shift back to public places and services spending.
Figure 4. US Total Retail Sales, by Sector: YoY % Change [wpdatatable id=2054 table_view=regular]
Data are not seasonally adjusted Source: US Census Bureau/Coresight Research