US retail sales rebounded by a record 17.7 per cent in May as American consumers began spending and states gradually reopened their economies following the pandemic lockdowns.
That was the biggest monthly gain on records dating back to 1992, surpassing the October 2001 reading of 6.7 per cent, and followed a decline of 14.7 per cent the previous month. It was also more than double economists’ expectations for an 8.2 per cent increase.
Sales of clothing and accessories, electronics and appliances, sporting goods, furniture and home furniture stores and motor vehicles all surged last month after steep declines in April.
So-called control sales, which strip out more volatile items such as food, petrol and building materials, rose 11 per cent, ahead of expectations.
Despite the monthly surge, retail sales were down 6.1 per cent from the same period a year ago.
The data follow indications from department store chains Macy’s, Kohl’s and Nordstrom last week that sales at reopened stores were improving from their depths, while monthly auto sales also climbed in May from the previous month.
The increase in spending came as 2.5m Americans returned to work last month and as household incomes were aided by federal support in the form of direct deposits to bank accounts, expanded unemployment benefits and the Paycheck Protection Program aimed at keeping employees on the payroll.
The figures were cheered by US president Donald Trump who tweeted: “Wow! May retail sales show biggest one-month increase of ALL TIME, up 17.7%. Far bigger than projected. Looks like a BIG DAY FOR THE STOCK MARKET, AND JOBS!”
US stocks were set to rally on Tuesday and the data gave the S&P 500 benchmark index futures an extra boost. S&P 500 futures were up by 2.4 per cent after the data release, after being about 1.9 per cent higher beforehand.
While America has been gradually rebooting its economy since May as coronavirus cases slowed, the outbreak has spread in western and southern states that were among the earliest to reopen and heightened fears about another round of shutdowns.
However, both US Treasury secretary Steven Mnuchin and White House economic adviser Larry Kudlow have said in recent days that the US cannot shut down the economy again.
The Federal Reserve last week reinforced its grim assessment of the country’s economic prospects at its monetary policy meeting last week, even as chairman Jay Powell said he was “not even thinking about thinking about raising rates”.
While the Fed and Congress have already taken unprecedented measures to support the US economy, policymakers at the central bank forecasts that the coronavirus crisis “will likely create persistent fragilities” for US households and businesses.
