US retail sales skyrocket a record 17.7% in May

Retail sales in the United States soared a record-setting 17.7% in May after some stores began to reopen amid the coronavirus outbreak and other consumers resumed online purchases. 

The huge jump follows even bigger declines of 8.3% in March and 14.7% in April; retail stores in around 43 states closed in March and most remained closed through the entire month of April because of shutdowns to slow the spread of the coronavirus.

Online sales continued for many retail outlets, but could not make up for the foot traffic lost. Some outlets also experienced shipping delays that hampered sales.

The rebound is a good start toward economic recovery, but retail sales are still down 6.1% from a year ago. The numbers far exceeded expectations of between 7 and 8% increases, however.

Economy turning around

Auto sales were up 44% for the month, and clothing sales were up 188%. Grocery sales were also up 14.4% as people at more meals at home rather than in restaurants.

Re-opening also caused employers to add 2.5 million jobs in May, signaling that job losses could have reached a low point in April. More than 39 million people filed for unemployment in March and April.

But even with job losses turning a corner, the recovery could be slow and prolonged as many business reopenings are still at partial capacity and some businesses like movie theaters and salons remain closed in some locations.

It is also unclear what will happen if there is a large resurgence of coronavirus cases over the coming months, and whether further business shutdowns might be put in place in some states.

Future obstacles to recovery remain

Consumer spending accounts for 70% of all economic activity in the U.S., the Associated Press reported, and half of that spending is in retail.

Unfortunately, thousands of businesses are expected to close permanently because of prolonged shutdowns. Business Insider reports that at least 12,000 retail locations could close this year, and numbers could be much higher if sales remain slow.

The Independent Restaurant Coalition also said that up to 85% of independent restaurants may close by the end of 2020, which would be devastating to the long-term economy.

“This may very well be the shortest, but still deepest, recession ever,” senior economist at BMO Capital Markets Jennifer Lee said, adding that she doesn’t expect a repeat of the huge jump in June.

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