Consumers Send Mixed Messages on May Retail Spend

Retail sales for the month of May signal a consumer slowdown overall — and some mixed trends among discretionary categories.

The data released Tuesday (June 18) by the Commerce Department show that overall, retail sales were up 0.1% over April’s level, a slower pace than consensus estimates that had pegged the increase at 0.3%.  The snapback’s seemingly an anemic one from the 0.2% decline seen in April.

The shifts in spending are evident, where consumers pulled back on spending on food — both at home and when dining out. Spending at grocery stores was down 0.4% month over month; the same percentage decline over the same timeframe was seen at food and drinking establishments.

As to where consumers did spend: Sporting goods and hobby stores saw a 2.8% gain month over month, electronics as a category was up 0.4% and spending on clothing was up 0.9% in May vs. April. Slight 0.1% gains were seen at health and personal care stores.

The picture that emerges is one where consumers are making tradeoffs, perhaps outfitting themselves and getting the outdoor equipment they need for the warmer months. Interestingly, there’s been a rebound in spending at non-store retailers, a category that is usually used as a proxy for online sales.  That category was up 0.8% in May. We’d contend that a shift to cheaper channels may have sparked an acceleration of spending across digital channels.

The Read Across

Dovetailing the above with the May inflationary data from last week — as the Consumer Price Index was 3.2% higher in May — the price increases food consumed “away from home” at restaurants and the cost of rent were higher in the month. Restaurant prices were 0.4% higher in May, and given the fact that retail sales in this category declined, the pullback is in evidence. As prices dropped 0.3% in apparel, it might make sense that we’ve seen a lift in that spending category.

The PYMNTS Intelligence report “New Reality Check: The Paycheck-to-Paycheck Report: Why One-Third of High Earners Live Paycheck to Paycheck” found that two-thirds of consumers who find it challenging to meet their monthly expenses have been cutting back on what they deem “nice to have” items so that they can spend on essentials like food. In this case, we may be seeing a bit of a switch: They’re dialing back, just a bit, on food, to grab hold of those “nice to have” items.

In many cases the year-over-year trends are still intact — consumers are spending more than had been seen in May of 2023, as sales for restaurants were 3.8% higher than a year ago. General merchandise sales — at stores such as Walmart, for example — were 2.7% higher year on year and grocery is up 1.3% from May of last year. But as the accompanying chart shows, and per PYMNTS Intelligence data, prices are 22% higher, and retail prices are about 25% than had been seen before the pandemic. The headwinds seen in May and April may herald a somewhat stagnant summer.