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Retail sales likely strengthened in May as mobility increased and consumers were mostly undeterred by higher prices, industry experts told MNI, painting a rosier picture than most forecasts suggest.
Retail spending growth through May was "solid," said Jack Kleinhenz, Chief Economist at the National Retail Federation, driven by pent up demand as restrictions on business, travel, and in-person activities eased. Consumers were also still "flushed with cash" from stimulus checks and tax returns, he added.
Kleinhenz said spending on things like clothing and accessories was particularly strong through the month, fueled by increased spending on travel. Roughly 35% of consumers surveyed by the NRF last month said they would be willing to go on vacation as vaccine availability and uptake became more widespread and that was "certainly a major factor that's going to lift retail spending in May," he said.
Retail spending last month was also bolstered by the Memorial Day holiday at the end of the month, Kleinhenz said, the first major holiday since the start of the pandemic that vaccinated Americans were given permission to celebrate as they normally would by the Centers for Disease Control and Protection. That should boost spending at grocery stores, restaurants, and sporting goods stores, he added.
New vehicle sales, however, slowed slightly in May, hitting a seasonally adjusted annual rate of 17 million following April's SAAR of 18.8 million -- the highest rate since 2005, Kayla Reynolds, an industry intelligence analyst at Cox Automotive, told MNI.
May's slowdown mostly reflects limited inventories, she said, and isn't indicative of a drop in demand. The days' supply of vehicles like SUVs and crossovers was just over 20 days last month, Reynolds said, well-below the national average of 35 to 40 days.
"That's very reflective of the demand that consumers have in the market," she said, and also points to "the inability of manufacturers to keep up with that demand." Sales growth is expected to slow into June because of low inventory levels, she added.
New and used vehicle prices rose rapidly through the month, Reynolds said, and certain used vehicles are approaching the same price point as a brand new model. Prices for used vehicles rose 7.3% in May, according to the Bureau of Labor Statistics' May CPI report, accounting for roughly a third of the increase
Week-over-week gasoline prices grew above seasonal averages in May, said Patrick De Haan, head of petroleum analysis at Gasbuddy, helping along spending at gas stations through the month.
De Haan said he sees fuel prices growing through the summer as the price of oil increases, but Americans "aren't going to be slowed down by rising prices."
"Sixteen months into a pandemic, things are reopening and Americans are feeling much better about getting out," he said. "They're not going to let prices that are a little above seasonal norms hold them back."
Still, gasoline demand dipped slightly in May over April, he said, though that was likely because April had an additional Friday, the "best day of the week" for spending at the pump.
Headline retail sales are expected to fall 0.6% following April's flat reading, according to Bloomberg. Excluding vehicle sales, retail sales should grow 0.4% after falling 0.8% in April, while sales excluding vehicles and gas station sales should remain unchanged. Control group sales should fall 0.4% following a much larger 1.5% decline in April.