Illustrated with 13 whiplash-inducing charts.
By Wolf Richter for WOLF STREET.
Total retail sales in August inched up by 0.6% from July, to a new record of $538 billion (seasonally adjusted), according to Census Bureau data this morning. It was the second month in a row of only slight upticks, after big bounce-backs in May and June, from the plunge in March and April. Compared to August 2019, total retail sales were up 2.6%, not adjusted for inflation, with large differences in various categories, from restaurants to auto sales, and we’ll get to those in a moment:
Powered by stimulus.
Consumers received the stimulus checks of $1,200 per taxpayer and $500 per child, starting in April, and those who were on state or federal unemployment insurance received the extra $600 a week in federal top-off money, which expired in July, and now many of them are receiving the extra $300 a week that started in August.
But the extra $600 a week and now the extra $300 a week don’t necessarily arrive one check a week. There has been a backlog in processing these claims, and suddenly consumers receive lump-sum payments to cover weeks of claims. For example, California started sending three of the $300-a-week in extra money as $900-lump-sum payments starting on Labor Day. Recipients might not get any unemployment for weeks, and suddenly they get a catch-up payment of thousands of dollars.
And what did they do with it? Similar to the stimulus money in April, many people used these funds to pay down their credit card balances and other revolving credit, which have dropped by nearly 10% from February through July, including the biggest plunge on record in April when the stimulus checks arrived. Credit card balances are now back to levels first seen in 2008:
People created room on their credit cards and then they spent these funds more or less gradually by charging up their credit cards again.
Other people used these stimulus and extra unemployment funds for down-payments on a car. In addition, this summer few people flew to go on vacation – with air passenger traffic still down about 70% in August from a year ago, and others didn’t go to the dentist and delayed other healthcare spending.
In addition, over 7% of all home mortgages are still in forbearance, and homeowners don’t need to make mortgage payments and can spend that money elsewhere. And eviction bans have given renters some leeway in how to spend their money, shifting some rent payments to retail and other categories.
In other words, the stimulus and extra unemployment money didn’t all get spent in the month during which the government sent it. The spending was spread out over time, and spending priorities shifted in massive ways, and went in bursts, such as sporting goods, some of which then faded.
Retail sales by category.
Sales at new & used auto dealers and parts stores were essentially unchanged in August, compared to July, and just a hair off the record in June. At $109.8 billion (seasonally adjusted) the largest category in retail sales, they were up 4.5% from August last year.
These dollar-sales come amid still sharply lower unit sales. In August, new vehicle sales in units were down 15% year-over-year, and used vehicle retail sales in units were down 2%. This disconnect between rising dollar sales and still-down unit sales is driven by two factors:
Price increases that were particularly sharp in used vehicles; and demand for expensive new vehicles, such as higher-end pickups and SUVs. The average transaction price of new vehicles across the industry in August jumped by 7% year-over-year, according to J.D. Power estimates, reflecting price increases and a larger proportion of high-end units in the sales mix, in line with the “K-shaped” recovery:
Sales at “Non-Store Retailers” (mostly ecommerce) ticked up a smidgen from July after having spiked during the months when many brick-and-mortar stores were closed, and when consumers switched to ecommerce for items even when stores were open, such as groceries. Sales of $83.1 billion in August (seasonally adjusted), the second highest ever after the record in May, were 22.4% higher than in August last year.
Non-store retailers, the second largest category behind auto and auto-parts sales, overlaps with much of ecommerce but includes other non-store retailers such as mail-order operations, door-to-door sales, and sales at stalls and vending machines:
Sales at Food and Beverage Stores fell 1.2% in August from July, to $71.0 billion, continuing to unwind the spike in March ($81.6 billion) that had triggered the “empty shelves” phenomenon. But they were still 10% higher than last year, as much of the spending in restaurants, cafeterias at work and schools, etc., has shifted to the home:
Sales at general merchandise stores (minus department stores) ticked down a tad from July, to $50.9 billion, having unwound most of the 15% spike in March, but were still up 4.9% from a year ago. Walmart and Costco are in this category:
Sales at brick-and-mortar department stores fell 2.3% in August from July, to $9.4 billion, down 16.9% year-over-year, after having declined relentlessly for 20 years. The Pandemic accelerated that process, with numerous chains filing for bankruptcy, and some being liquidated. Even the survivors shed countless stores, abandoning mall after mall because Americans have abandoned department stores. Some department stores, such as Macy’s, have vibrant online sites, but those sales are not included here. This is just brick-and-mortar, a sad sight, having long been obviated by events:
Sales at building materials, garden supply and equipment stores rose 2.0% in August, from July, but remain in the same high range of the past four months, up roughly 15% from a year ago, after having spiked in May. These stores include everything from neighborhood hardware stores to Home Depot. This surge in sales is confirmed by what these types of retailers have reported, and by innumerable stories about homeowners spending money on their homes, particularly decks and backyards, to be enjoyed during their extended staycations:
Sales at Restaurants & Bars rose 4.7% in August from July, to $50.9 billion, but were still down 15.4% from a year ago. This includes fast-food places and drive-throughs that never shut down, along with sit-down restaurants, many of which were still only open for outdoor seating, or have not re-opened at all:
Sales at sporting goods, hobby, book and music stores fell 5.7% in August from July, to $7.4 billion, but were still up 11.1% from a year ago. It was the second month in a row of declines, after they’d gone wild, first collapsing, then spiking. In the months before the Pandemic, sales had fallen below 2007 levels. But suddenly, people bought stationary bikes, actual bicycles, musical instruments, camping gear for their social-distancing vacation, and what not. Stories of shops running out of stuff, such as bicycles, were everywhere:
Sales at furniture and home furnishing stores rose 2.1% in August from July, to a record $10.2 billion, up 3.8% year-over-year, after having collapsed in March and April, and then bounced back, as people spruced up their homes and created work-at-home corners and what not:
Sales at clothing and accessory stores rose 2.9% in August from July, to $17.7 billion, but were still down 20.4% year-over-year, after an 86% collapse in March and April. People still buy clothes, but much of that business has wandered off to ecommerce sites:
Sales at gas stations inched up 0.4% in August from July, to $35.2 billion, still down 15.4% year-over-year. These sales include junk food, beer, motor oil, coffee, and other stuff people buy at gas stations. Gasoline prices are highly volatile, and a part of the sales movement is due to price changes:
From the retailer’s annual sales point of view. For retailers that got hit during the pandemic, and then recovered, such as furniture stores, the year 2020 is still going to be a down-year. Sales in March, April, May, and June were sharply below the year-ago levels. And without a big over-shoot, those sales lost during those months won’t come back.
For example, furniture store sales set a record in August, but only by a small margin, and not a big overshoot, and year-to-date, sales are still down 11% from the same period last year, and a huge overshoot would be needed in each of the next four months to get even with 2019, and the way it looks now, that’s not going to happen.
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