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Supply Chain ‘Constraints’ Drove May’s Retail Sales Dip

Retail sales remained at elevated levels in May despite month-to-month fluctuations that masked near-record performance, the National Retail Federation (NRF) reported.

“While May retail sales were down slightly, largely due to supply chain constraints, the more accurate indicator remains in the year-over-year data which, as the NRF calculates, showed growth of over 17 percent,” said NRF president and CEO Matthew Shay. “For the first five months of this year, retail sales are already tracking 17.6 percent above the same five months of 2020, giving us further confidence in our newly revised sales forecast of growth between 10.5 percent and 13.5 percent to more than $4.44 trillion for 2021.”

While there are “downside risks related to labor shortages, supply chain bottlenecks, tax increases and over-regulation,” households are healthier and consumers are demonstrating their ability and willingness to spend, Shay added.

NRF chief economist Jack Kleinhenz also stressed that month-over-month comparisons and percentages of change didn’t tell the real story.

“We are at a highly elevated level of spending, with dollar amounts in recent months some of the highest we’ve ever seen,” Kleinhenz said. “Long-term trends in the number of dollars spent tell much more about the continuing economic recovery than whether sales were up or down from month to month.”

Retail sales as calculated by NRF were the second highest on record in May at $388.6 billion, topped only by holiday spending of $414.7 billion in December. Demand has continued to be strong even as the impact from government stimulus has faded.

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“There is still pent-up demand for retail goods and consumers are likely to remain on a growth path into the summer,” Kleinhenz added.

The U.S. Census Bureau on Tuesday said overall retail sales in May were down a seasonally adjusted 1.3 percent from April, but up 28.1 percent year-over-year. That compares with increases of 0.9 percent month over month and 53.4 percent year over year in April. The year-over-year increases for both April and May were unusually high because most stores were closed by the pandemic during those months last year. Despite occasional month-over-month declines, sales have grown year-over-year every month since June 2020, according to Census data.

NRF’s calculation of retail sales–taking out automobile dealers, gasoline stations and restaurants to focus on core retail–showed May was down 1.2 percent seasonally adjusted from April, but up an unadjusted 17.3 percent from May 2020. That compared with a month-over-month decline of 0.6 percent and a year-over-year increase of 30.9 percent in April.

NRF revised its 2021 annual retail sales forecast last week sales this year are now expected to increase between 10.5 percent and 13.5 percent over 2020 to between $4.44 trillion and $4.56 trillion. Online and other non-store sales, which are included in the total, are expected to rise between 18 percent and 23 percent to between $1.09 trillion and $1.13 trillion.

May sales declined month over month in two-thirds of retail sectors, but increased from a year earlier in every category except grocery stores. This was led by large increases at clothing, electronics and furniture stores that were ordered to close last spring.

According to Census Bureau data, clothing and clothing accessories store sales were up 3 percent month over month seasonally adjusted to $25.25 billion and increased an unadjusted 198.7 percent from May 2020. General merchandise stores, which includes department stores, saw sales fall 3.3 percent month over month to $67.34 billion, but rise 9.3 percent year over year. Department store sales increased 0.16 percent to 11.42 billion for the month and were up 28.5 percent year over year.

Furniture and home furnishings store sales were down 2.1 percent month over month, but up 64.7 percent from a year earlier. Sporting goods store sales ticked down 0.8 percent compared to April, but jumped up 40.9 percent year-over-year.

Online and other non-store sales were down 0.8 percent in the month, but were up 8.2 percent year over year.