By Joe Higgins, Quest 4 Quality
- Total retail sales declined 1.3 from April to May as shoppers shifted from goods to services.
- Sales rose 91 percent at appliance and electronics stores and 66 percent at furniture stores.
- Jobless claims rose slightly but are still significantly lower than last year.
Our lives began to feel more normal in May and June than at any time during the past year.
Restaurants are open, spectators are at ballgames and more Americans are now seen without masks. As we reach the later stages of vaccinations, more families are traveling, spending nights in hotels, and even flying to new destinations.
The U.S. Commerce Department reported that retail sales fell below expectations for May as consumers began to shift their spending habits. I am sure we all expected this to happen at some point; after all, we have spent more than 13 months avoiding crowds and situations that put us at risk for the virus.
May’s retail sales dropped 1.3 percent from April after cratering a year ago in what looked like a very bleak time for the U.S. economy.
Analysts had anticipated a milder decline of 0.7 percent in May, but don’t put too much stock in this drop in retail, as I think the extraordinary recovery we have experienced is still on track. It was expected that consumers would move away from the goods portion of our economy and begin spending their cash on services like travel, dining, hotels and other forms of entertainment. Watching professional baseball games, NBA playoffs or the start of football season with full stadiums and arenas will raise our spirits and bring hope for a better future.
In the spring of 2021 consumers ventured out with wads of stimulus money and fat savings accounts, so May’s decline in retail appears to be a blip in the progress we have made in the past year.
While a pullback of 1.3 percent was unexpected, I am not concerned. America’s gross domestic product (GDP) is growing faster than any other country in the world. Consumers are now spending at pre-pandemic levels in what is still an early period in the recovery. Consider that over 2 million travelers moved through TSA lines at airports each day last week, while a year ago that number was consistently below 150,000. Hotels are running at 60 percent capacity and over 40 million Americans took to the road over the Memorial Day weekend.
Another huge reason we had a drop in retail was due to a downturn in sales of automobiles and light trucks, which declined 4 percent in May. The global supply chain for parts, and semiconductors in particular, has created a huge bottleneck for the industry, as millions of nearly finished vehicles sit idle in lots waiting for chips.
According to the Commerce Department, while sales of clothing were up over 200 percent from last year, number two on the list was appliance/electronics stores, which were up 91.3 percent, while sales at furniture stores were up 66.6 percent. BrandSource members should be proud that over the past 14 months, their industries have ranked first, second or third in every retail sales report.
Another strong indicator for the home goods industry is the incredible rise in home equity over the past year. Overall sales of homes are up double digits, interest rates are at historic lows, and there is a severe shortage of housing across America. This is the perfect storm for consumers to borrow against their rising equity to remodel their kitchens and add new furniture.
I was disappointed, however, that last week’s jobless claims moved up to 412,000 for the first time in 12 months as other indicators pointed to a rebound in the job market and the overall economy. Specially, the Labor Department reported that claims were up 37,000 from the week prior; this number is significant because jobless claims reflect rising numbers of layoffs. This isn’t something you would expect in a rapidly expanding economy.
Still, the report goes on to say that the one-month average of claims declined to 385,000, which is the lowest since February 2020. This represents a dramatic improvement over last year, when we had over 1.4 million claims for benefits. And with companies reopening, the hiring of new employees will gain momentum and we will see fewer layoffs. In April alone employers advertised over 9 million jobs, which was up 15 percent from last year.
The Bottom Line
We are in an interesting time in America. Inflation is on the rise, housing prices have never been higher, bank accounts are full, credit is available, the economy is now open, and the virus, for the most part, is in retreat.
There will be a shift to the services side of our economy as the leisure and hospitality sectors now take their turn in the spotlight. However, consumers will continue to make prudent choices with their cash, and one of those choices, according to the experts, is home improvement. The home improvement game never goes out of style, especially in an era when home equity is at record levels. In the long term, the next few years will be good for your business.
Joe Higgins is a 42-year veteran of GE and Whirlpool Corp. who brings his experience to bear as a business consultant, public speaker, AVB keynoter and YourSource News contributor. Visit his website, Quest 4 Quality with Joe, at www.q4qwithjoe.com.