Incoming reports on the American consumer remain encouraging. For example, retail and food services sales totaled $485.5 billion in May, according U.S. Census Bureau data released this week. That was a 17.7 percent surge from the previous month, the largest gain on record, and the April print was revised higher. A big rebound was expected because the GDP-destroying lockdowns started to be lifted in May, but last month’s retail sales jump was more than double the consensus forecast, and some retail categories are already back to pre-pandemic levels.
With the economic reopening even further along this month the June report should also be solid, especially since more households are now flush with cash thanks in part to unprecedented transfer payments that have dampened the economic hit from the coronavirus. However, it is also important to stress that we are not out of the proverbial woods quite yet because the latest Labor Department data on initial jobless claims showed that 1.5 million new Americans requested unemployment benefits last week. On the bright side that is the 11th consecutive weekly decline for this leading indicator but at such a high level this late into the “reopening” it suggests some of the job losses could be permanent. A faster and sustained rebound in consumer demand will help many of these people get rehired, but lingering concerns (see below) about a “second wave,” and potential political pressure for another lockdown are major obstacles in the way of a V-shaped consumption recovery.
Sources: Econoday, U.S. DoC, U.S. DoL, Gallup, FRBSL