Retail Sales Bounce Up 17.7% After Record Drop As States Reopen

Jun 16, 2020
Originally published on June 17, 2020 3:05 pm

Updated at 4:53 p.m. ET

As more states and cities allowed restaurants and shopping centers to reopen, U.S. retail spending swung big in May, climbing 17.7%, the U.S. Commerce Department said Tuesday. Major stock indexes rose after the report was released.

Spending is still down 6.1% from a year earlier because of the coronavirus pandemic. And economists warn of a long and uncertain recovery. But May's upswing follows a record historic collapse in March and April, when retail spending nose-dived as people avoided outings for food or shopping, especially for clothes and furniture.

Retail sales — a measure that includes spending on gasoline, cars, food and drink — are a key part of the economy, which is sputtering back at different rates across the country after weeks of lockdowns. May's sales also got a boost from people spending their tax refunds and coronavirus financial assistance. As businesses reopen, however, several states have reported new spikes in coronavirus cases.

That has added to warnings that Americans' shopping habits may be changed for a long time, if not forever. The pandemic, for example, has accelerated the shift to online orders, including food and groceries. This made online retail the only category to see demand grow even during the April meltdown, when retail sales overall fell a revised 14.7% from March.

Here's where people were spending in May, compared with a month earlier:

  • Clothing and accessories stores: +188%
  • Furniture stores: +89.7%
  • Sports, music and other hobby stores: +88.2%
  • Electronics stores: +50.5%
  • Department stores: +36.9%
  • Restaurants and bars: +29.1%
  • Gas stations: +12.8%
  • Online retailers: +9%
  • Big-box stores: +6%
  • Grocery stores: +1.3%

Many of these categories are seeing dramatically lower demand compared with pre-pandemic times. People are still spending much less on clothing and electronics and at gas stations, restaurants and department stores.

This has exacerbated the struggles of many retailers and suburban malls. Preppy fashion store J. Crew, luxury department store Neiman Marcus and mall staple J.C. Penney declared bankruptcy in May. Retail chains might permanently close up to 25,000 U.S. stores this year, the majority of them in malls, according to a report by Coresight Research. At the start of the pandemic, in March, the group had forecast 15,000 permanent store closures.

Though shoppers appear to have been enthusiastic to enjoy spring air and leave the homes where they've been cooped up for weeks, tens of millions remain unemployed. Companies have started to rehire, but the Federal Reserve is projecting that the unemployment rate will still be more than 9% by the end of 2020.

"Is it possible the worst of the coronavirus pandemic is behind us? Maybe, but we are not out of the woods yet, and uncertainty abounds," National Retail Federation Chief Economist Jack Kleinhenz said earlier this month. "With such [sizable] disruptions, it is difficult to tally the damage or determine the future."

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People are shopping again. That is the big takeaway of today's government report showing consumer spending rebounding sharply in May. That's after record declines in March and April. So what does that mean for the health of the U.S. economy? NPR's Alina Selyukh is here to tell us.

Hey, Alina.


KELLY: So we said spending rebounded sharply. How sharply?

SELYUKH: Retail sales swung up almost 18% in May. And really important note here is that we're talking about a comparison to April. Remember, March and April were two very dire months for retail. Much of the country was almost entirely shut down. So compared to that, in May, things began to change. States and cities began reopening shopping centers and restaurants. Lots of people got tax refunds and coronavirus financial relief - so some money to spend. The weather was nice. Folks were eager to go outside, maybe feeling optimistic about passing the worst of the pandemic.

KELLY: So what were people buying last month?

SELYUKH: Everything. There were two categories that took a nosedive in April, furniture and clothing. And May was a whole other story for them. When people first went into the lockdowns, new clothes were really not a priority for anyone. There wasn't really anywhere to go in them, you know? But then in May, with graduations, maybe some carefully staged weddings and general outings, sales of clothes nearly tripled compared to that rock bottom in April. Then you've got stuff to stay entertained - books, musical instruments. People got into lots of outdoor activities - going back to golf courses, biking, jumping rope in the backyard, grilling, camping, driving more - so buying more at gas stations. And even going back to eating in restaurants.

KELLY: All right. So we're better dressed than we were earlier in the spring.


KELLY: Maybe a little bit. We've got gas in our car, maybe. But what does this tell us about the overall state of the economy? I'm guessing you're not going to tell me it means all is well.

SELYUKH: No, we're still nowhere near the kind of spending that we saw before the pandemic. Sales are still down more than 6% from a year earlier. And lots of retailers and especially shopping malls are in trouble. I talked to Deborah Weinswig, CEO of Coresight Research. That's been tracking bankruptcies and permanent closures at retail chains. And she says it's been quite intense, as her team started the year with a prediction of 8,000 stores expected to close permanently then almost doubled it as the pandemic began and now upped it again to predict closures of up to 25,000 stores this year, a majority of them in malls.

DEBORAH WEINSWIG: It's staggering the amount of bankruptcies we've seen. And I think that's only accelerating as everyone's been truly trying to figure out their finances. But it's evident that, you know, we will see greater bankruptcies. And it's not just retail. It's restaurants. And that also impacts the health of the mall.

SELYUKH: There is one category that has continued to grow, even through it all, which is unsurprisingly online shopping, with lots of people buying clothes, makeup, especially food online for the first time.

KELLY: So just briefly, Alina, how does the data we got today change what we know, change what we might expect for economic recovery?

SELYUKH: Consumer spending is by far the main driver of economic activity. So seeing it on an upward trajectory is an encouraging sign. But, of course, there's a lot of worry about what happens next. Will there be new shutdowns as businesses have begun reopening? Several states have reported new spikes in the coronavirus. Tens of millions remain unemployed. Those financial relief checks for coronavirus are going to end. And economists warn the recovery may be a long and uncertain.

KELLY: Thank you, Alina.

SELYUKH: Thanks.

KELLY: NPR's Alina Selyukh. Transcript provided by NPR, Copyright NPR.