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Emily McCormick joins Myles Udland, Brian Sozzi, and Julie Hyman to break down May’s retail sales report, which fell more than expected, including which industries saw the biggest declines.
JULIE HYMAN: First, let's take a look at what's going on with those retail sales numbers. We also got some inflation data this morning on the wholesale front. Our Emily McCormick is here with the details for us on those May retail sales numbers. Emily?
EMILY MCCORMICK: Well, Julie, retail sales registered a monthly decline in May for the first time since February. So we did see some consumer spending showing additional pay back after a stimulus-boosted surge earlier this year.
Now, sales for all categories were down by 1.3% in May over April. This was worse than the 0.8% drop expected based on Bloomberg consensus data. Now, a bit of a bright spot in terms of revisions to the previous month, however, since we did see April's retail sales be upwardly revised to show a 0.9% monthly increase from the flat result reported previously. But for May, looking by category, we did see the majority of retailers post monthly declines in sales. And this was led by building material and supply dealers, with a drop of 5.9%. And we also saw miscellaneous store retailers with a drop of 5%. And motor vehicles and parts dealers saw sales decline by 3.7%.
Now, that said, we did see some continued growth in the reopening categories of retailers, especially when it comes to services. For instance, we did see food services and drinking places post retail sales increases of 1.8%. And clothing stores saw a rise of 3%.
Now, noting what some economists were saying in commentary immediately following this report, yes, they were saying this was a disappointment compared to consensus and also compared to the surges in spending that we saw earlier this year. But we should note that sales are still 28% higher than they were this time last year and 21% higher than they were from May 2019. So overall, growth in retail sales is showing some signs of moderating on a monthly basis but still plateauing here at an elevated level, guys.
JULIE HYMAN: Emily, thank you. And again, just to put a fine point on what Emily was just talking about, the total value of retail sales was $620.2 billion in May. If you look just pre-pandemic, in February of 2020, it was $526 billion. So again, still above those levels.
Guys, if we look out across the categories, it kind of makes some sense to me what's up and what's down. What's up? Restaurants, food. Restaurants and bars saw sales rise, right? You saw motor vehicle sales down. You saw building materials sales down, furniture down. To me, the common theme there is that it's all stuff that is difficult to get right now and/or is seeing increased prices.
Now, we don't know exactly why people weren't buying, if it was for one reason or the other reason or both reasons. But it seems to me that that's kind of the common theme. You don't have any trouble at this point, or a lot less trouble, finding a restaurant to go to. But you're not getting your furniture maybe that you exactly wanted or not getting it in a timely fashion. Myles, how do these numbers strike you?
MYLES UDLAND: Yeah, no. I mean, I think that's kind of how I see it as well. And I know that it's a very noisy period. And I'm reminded of that line from Goldman Sachs from a couple of weeks back that we should expect larger than usual surprises on this economic data but also put less than usual weight on each piece of data.
But the overall story, I do think, is a fairly straightforward one. And Sozzi flagged it for us a little bit in our morning meeting today. And I'm thinking, maybe as a way into this for tomorrow's Morning Brief, but it's really about the transition, again, the continued transition into services and away from goods.
All we've had over the last year, really, is an ability to spend on stuff because we weren't able to do the things that had really become the foundation of the consumer economy over the last decade or so. And we're seeing that shift.
And there's also a reminder in here. And the interesting thing is, everybody who believes in economics and the free market and all that kind of stuff should be heartened by this kind of data. We are seeing consumers respond to economic conditions. To me, there's no other way to read that decline in auto sales, Sozzi, from April into May than as a result of prices just getting too high and people going to a dealer, seeing what they might have to pay because of supply constraints, and saying, you know what, I'll take a pass on this.
And yes, it's a decline from an extremely high increase from March into April. But people do respond to pricing pressures. And I think we're starting to see that and are likely to see a lot more of that as we get through the summer.
BRIAN SOZZI: Yeah. In the case of purchasing a car, Myles, I suspect buyers are hoping that inflation is in fact transitory. But I do want to push back to some chatter I saw at least on social media right after this report hit, talks of stagflation. It's comical. This is not a stagflationary report. I would say this is actually a quite good report.
You had an upward revision to the prior month retail sales up 9/10 of a percent compared to virtually unchanged previously. And as Julie mentioned, we saw strength in key areas of this report. Personal care products, sales up 1.8%. A couple of weeks ago, we drove into the makeup industry and what companies can benefit from that. And this retail sales report is telling you the likes of an Ulta, an ELF beauty, an E-L-F beauty, a Target, even a Walmart is now starting to benefit from people going back out more and having to buy makeup sales.
Restaurant and bar sales up 1.8%. Clothing was the strongest area in report, sales up 3%. Again, that dovetails what we were talking about yesterday on the show, the likes of Levi's, companies selling jeans, some companies selling T-shirts, they're doing very well.
And then you have to step up take a step back. If you think this is stagflation, why do you think people are going out there, spending all this money right now on clothes? They're probably going to take a vacation this summer. I think in a stagflationary environment, maybe you just don't buy those new pair of jeans, or you don't go out and buy a new vacation, Julie.
JULIE HYMAN: Yeah, I'm with you. I mean, everything that we see points to demand not being the problem. And if demand's not the problem, then it's hard to see a stagflationary scenario.
But I will expound a little bit more on the inflation part of this stagflation because we did see inflation last month, of course. We saw that in the CPI numbers. And now we see it in the producer price index as well. The wholesale numbers, on an absolute basis, up 6.6% year over year. That's the biggest increase in nearly 11 years.
And then if you look at the so-called core number on the PPI level, if you subtract out food, energy, trade services, that was up 5.3%. And that's the biggest increase since the 12-month data started being compiled in August of 2014. So you did see the wholesale prices go up. And that's something to continue to keep an eye on. How much of that is going to be passed through? Are companies thinking that that is transitory? So that's something to keep an eye on.