Retail sales rebounded sharply in May as thousands of stores and restaurants reopened after lockdowns were lifted and federal stimulus checks and tax refunds fueled a burst of spending, a sign that the United States economy is lurching back to life.
But while the 17.7 percent rise in sales reported on Tuesday is the largest monthly surge on record, the underlying data presents a more complicated picture and shows just how arduous an economic recovery from the coronavirus pandemic will be.
The May numbers followed two months of record declines, and overall sales were still down 8 percent from February. Some categories, like clothing, were down as much as 63 percent from a year earlier. And many of the stores and restaurants that welcomed back customers last month did so with fewer employees, reflecting a permanently altered retail landscape and an ominous sign for the labor market.
“I think a lot of it is lockdown fatigue,” said Beth Ann Bovino, chief U.S. economist at S&P Global. “I would caution not to be fooled by this large gain. We still have a long way to go in repairing the economy.”
May’s retail sales figures became the latest data point fueling the debate in Washington and on Wall Street about whether a broad reopening of businesses will cause the economy to snap back quickly or if additional stimulus measures are needed.
President Trump immediately seized on the positive monthly figures as evidence that a recovery was taking hold. “Looks like a BIG DAY FOR THE STOCK MARKET, AND JOBS!” he wrote on Twitter minutes after the Commerce Department released the numbers.
But Jerome H. Powell, chair of the Federal Reserve, sounded a more cautionary note around the broader health of the economy on Tuesday. Mr. Powell told the Senate Banking Committee that even as some parts of the economy were seeing a modest rebound, “levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery.”
“Until the public is confident that the disease is contained, a full recovery is unlikely,” he said. “The longer the downturn lasts, the greater the potential for longer-term damage from permanent job loss and business closures.”
The mixed signals about the economy fueled volatile trading on Wall Street. Stocks rallied in the morning after the retail numbers were released. But many of those gains soon evaporated, as investors processed the economy’s murky longer-term outlook. By early afternoon, the market had sprung back, with the S&P 500 ending the day up 1.9 percent.
Economists had expected a rebound from April, when widespread business closures drove retail sales to their lowest level since 2013, though the gain was greater than some had expected.
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After more than a month of quarantine, May brought a tentative restart of brick-and-mortar retailing across most of the country, with major chains like Macy’s and Gap reopening hundreds of stores. Some restaurants that had either closed or shifted their business to delivery and curbside pickup also reopened for in-person dining.
Driving some of the sales gains were warm weather, a sense of relief after weeks cooped up at home and optimism from some that the worst of the pandemic could be over. But they were also lifted by stimulus money — totaling $1,200 per recipient, plus $500 per child — that will run out in the coming months, with no indications that Congress intends to pass another round of assistance.
A jump in spending on motor vehicles and at restaurants and bars accounted for just over half of the overall gain in sales. Sales at clothing and clothing accessories stores, which were hit especially hard by the closures, rose 188 percent in May, while spending at furniture and home furnishing stores jumped 90 percent. Still, clothing sales were down 63 percent from a year earlier, while furniture was down 22 percent.
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No matter how fleeting, the rebound in May was a welcome boost, especially for small businesses like the Bookstore of Gloucester, an independent bookseller in Gloucester, Mass.
The store carries a selection of best sellers, books on race and books on the city’s maritime history. Even though it was selling only through curbside pickup and mailing out orders, sales were not much lower than in May last year.
“We were pleasantly surprised,” said Nicole Dahlmer, an employee.
She attributed the relatively robust sales to a loyal customer base and to longer waits at large booksellers like Amazon during the pandemic.
“The real test is if tourism holds up this summer,” said Ms. Dahlmer, who usually is paid to work in the store but has been working on a volunteer basis to help out the owner during the pandemic. She said she expected to return to a paid position soon.
Aneta Markowska, the chief financial economist for the investment bank Jefferies, said that while she had anticipated a jump in retail sales in May, it was off “a pretty low hurdle.” The bigger question was the sustainability of any improvement, since spending was bolstered by tax refunds and government stimulus efforts.
“By the time we get into July, those tax refunds will probably be largely spent,” Ms. Markowska said, “and then you’re back to, hey, what’s the underlying employment growth? Because that’s going to have to be the key driver of spending going forward.”
The positive numbers in May also mask some of the intense strain on businesses.
While his White Electric Coffee shop in Providence, R.I., was closed, Tom Toupin sold a special “Stay at Home” brew online, donating 20 percent of the sales to the state’s Covid-19 relief fund.
In preparing to reopen this month, Mr. Toupin spent about $1,000 on a device that enables contactless payments and reconfigured the front counter and register to create more distance between employees and customers.
But in the first few days after reopening, the shop had about 60 customers a day, down from a typical 350. Mr. Toupin has had to waste food because he was not sure how many customers would come, he said. Five people are working in the shop now, down from the usual team of a dozen.
“I was so excited to open up the shop again,” Mr. Toupin said. “I may have opened up sooner than I should have.”
Major apparel chains and malls have been aggressively pushing to reopen as quickly as legally possible to recoup some of their losses.
Some retailers have reported that their efforts are paying off. Kohl’s said last month that its reopened stores were about 50 percent to 60 percent as productive as they would typically be. Gap, which owns Banana Republic, Old Navy and Athleta, said this month that its reopened stores in North America were generating sales at nearly 70 percent of their performance last year. That is welcome news for the retailers — for the quarter that ended May 2, Gap and Kohl’s each reported net sales declines of more than 40 percent.
“There is some indication there is normal behavior out there,” said Jay Sole, a retail analyst at UBS, “where people want to go back to normal, they want to go have fun, get out of the house, and they’re buying the apparel they need to do that.”
But at the same time, many shoppers are encountering an experience that’s very different from what they are accustomed to. There may be long lines outside stores because only a limited number of people are allowed inside at a time. Changing rooms are closed in many places, forcing shoppers to approximate sizes and inevitably generating more returns. For some, shopping is simply less fun and far more transactional in the pandemic era.
On Sunday, shoppers waited outside the J. Crew Factory in an outlet mall in Westbrook, Conn.; signs said that the store’s capacity was 10 people and that masks were required. A greeter pointed customers to a table holding hand sanitizer when they walked in, and fitting rooms were unavailable. The shopping bore little resemblance to the leisurely, enjoyable experience that malls typically promote on their websites and in ads.
And even if shoppers are beginning to venture out again, the pandemic has already pushed many major names into bankruptcy, including J. Crew, the Neiman Marcus Group and J.C. Penney. While those companies are not liquidating, some number of future store closings and job losses loom, and there are still other retail bankruptcies on the horizon.
To that end, outlet malls and other retailers in open-air spaces may be better off than indoor malls as Americans readjust to the new norms of shopping. Gap, for example, noted that it was seeing better results at Old Navy stores, which are often away from enclosed shopping malls, as customers were more confident in such locations and better able to take advantage of new services like curbside pickup.
Enclosed malls “seem like the weakest channel out there now in terms of traffic,” Mr. Sole said.
He said that while last month was better than expected for sellers of clothing and footwear, there was “a real wait-and-see attitude” about how back-to-school shopping might shape up in late July and early August and still concern about a potential second wave of the coronavirus.
Retailers are “hoping for the best and preparing for the worst,” he said.
Ben Casselman and Jeanna Smialek contributed reporting.