MNI REALITY CHECK: US May Retail Sales To See Record M/M Rise

By Brooke Migdon

     WASHINGTON (MNI) - U.S. retail sales will score a record month-on-month

surge in May as many state stay-at-home orders expired and a re-opening stores

and boosted overall sales, industry leaders told MNI.

     Financial markets expect sales to increase 8.0%, although bouncing off of a

low base after April's 16.4% decline that was the weakest reading since the

current series started in 1992.

     Key points from industry leader comments ahead of the June 16 report:

     **May sales improved the most in states that had re-opened earlier and more

quickly than others, but mounting concern over a second wave of Covid-19

infections could derail a recovery.

     **A surge in personal income in April should translate into increased

consumer spending in May, likely elevating total sales.

     **The sharp percentage increase in sales should not be taken at face-value

and sales should only gradually improve in coming months as stay-at-home orders

are rolled back and states continue to re-open slowly.

     JACK KLEINHENZ, CHIEF ECONOMIST AT THE NATIONAL RETAIL FEDERATION

     Support from stimulus payments in April increased spending power in May,

which should boost May sales following April's steep decline, he told MNI.

     "We should be seeing a positive response to the amount of income out

there," he said. "The May spending report at this point should still be weaker

than normal, but probably an improvement over what we saw last month for the

month of April."

     Kleinhenz said sales from non-store retailers, referring to digital stores,

should remain elevated, but approximately 66% of U.S. consumers indicated this

month that they still depend on physical stores to meet their shopping needs,

according to NRF data. Only 40% of consumers said they currently felt

comfortable shopping in a store and about 80% said they would continue to social

distance inside stores once they are opened, he said.

     CHARLIE CHESBROUGH, SENIOR ECONOMIST AT COX AUTOMOTIVE

     "Overall, the market (for vehicle sales in May) was down 30%

year-over-year". 

     "We're going to find that April was the bottom in terms of vehicle sales

and that May was a nice improvement getting us back on the right path."

     Chesbrough told MNI that sales did not "snap back" to pre-pandemic levels

even as dealerships in many states re-opened in May and should gradually improve

over time. Still, sales in re-opened states recovered more quickly than in

states which have been more cautious to lift coronavirus restrictions.

     "We're seeing that which states are open and which states are closed as had

a dramatic impact on vehicle sales," noting that the share of national vehicle

sales increased in states like Texas and Florida, which began re-opening in late

April and early May, while more conservative states like Pennsylvania and New

York have lost nearly all of their share.

     JEFF LENARD, VICE PRESIDENT OF STRATEGIC INDUSTRY INITIATIVES AT THE

NATIONAL ASSOCIATION OF CONVENIENCE STORES

     Demand for gasoline was down about 24.5% in May from a year earlier, he

told MNI, although noting demand began to return as many stay-at-home orders

expired and states began to re-open. Demand is coming back even as fuel prices

are increasing, he said, which should put upward pressure on gas station sales.

     Lenard said, however, gas prices can only increase by so much before

hitting a point where it becomes a "burden on the pocketbook," and that that

price point could be lower than it was following the 2008 recession.

     GARY RAINES, CHIEF ECONOMIST AT FOOTWEAR DISTRIBUTORS AND RETAILERS OF

AMERICA

     Brick-and-mortar store sales are recovering, but could be down by as much

as 25% year-over-year in May after declining by almost 100% in April due to

widespread closures, Raines told MNI.

     "As you're beginning to see more and more stores reopen, the numbers are

improving relative to a couple of weeks ago, but there's still a substantial

year-over-year decline," he said.

     Raines said the most significant improvements in May were concentrated in

Southern and Western states, which had rolled back coronavirus restrictions

earlier and more quickly than many Northern states.

     "Some retailers are showing, by region, double-digit year-over-year

increases in brick and mortar sales," he said. "At the same time you're still

going to have many others that are still showing year-over-year declines, so it

is not consistent across the country."

     A growing concern that a "second wave" of Covid-19 infections is

approaching may hinder a sales rebound, he noted. "If we do see that second

wave, all bets are off," he said.

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

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