Americans are having to pay more to get less.
By Wolf Richter for WOLF STREET.
“Gonna Be Tough in May,” I said a month ago, when discussing the stimmie-powered retail sales in April. And that’s what it was. Retail sales in May, at $620 billion seasonally adjusted, were down 1.3% from April, and down a smidge from March too, according to the Commerce Department today. But retail sales remained very high historically, powered by left-over stimmies, and by market-mania gains, and above all, by inflation.
There have been massive price increases in the biggest segments of retail sales, including sales at auto and parts dealers (these retailers account for 22% of total retail sales), where prices have jumped into the stratosphere, including in used vehicles with an 18% price spike in the two months since March. These price increases are pushing up total retail sales in dollar terms as Americans are having to pay more to get less:
New & used auto dealers and parts stores: Sales fell 3.7% in May, to $136 billion seasonally adjusted, from the historic WTF spike in April and March. And sales fell despite the enormous price increases.
People are figuring it out, and some potential buyers are going on buyers’ strike. That is why a 30% year-over-year spike in used vehicle retail prices – and a 45% spike in used vehicle wholesale prices – cannot last and will unwind, but won’t unwind all the way, and prices will remain relatively high, as pricing pressures shift to other products or services:
For your amusement, below is the CPI for used vehicles with that phenomenal 30% spike year-over-year, triggered by an 18% price spike over the past two months. Auto purchases are mostly discretionary. Most people can delay by a year or two or more the moment when they buy a vehicle. That was proven during the Financial Crisis, when auto buyers went on strike and vehicle sales plunged and stayed down for years. In the retail data today, there is already a first glimpse of a buyers’ strike in the making (the chart shows the CPI value for used vehicles and not the year-over-year percent change).
The who is who of retailer segments.
Undisputed #1 in America are auto sales, accounting usually for over one-fifth of total retail sales (black line). Sales at nonstore retailers, mostly ecommerce, have become #2 over the years (top red line). Sales at grocery and beverage stores are #3 (green line). Sales at bars, restaurants, and other “food services and drinking places” are #4 (purple line), having been surpassed by nonstore retailers in 2019. Sales at general merchandise stores but not including department stores are #5 (yellow line). Department stores are near the bottom:
Ecommerce and other “non-store retailers”: Sales edged down 0.8% in May from April, to $88 billion, seasonally adjusted. Compared to May 2019, sales spiked by 33%. This category includes ecommerce, including ecommerce by traditional brick-and-mortar retailers such as Macy’s, mail-order operations, street stalls, vending machines, etc.
Food and Beverage Stores: Sales ticked up 1.0% in May from April to $74 billion, about the same as in May 2020, but up 17.1% from May 2019. Working from home, reduced restaurant visits, etc. have shifted some consumption from business venues to households, and thereby to retail stores. But as we’ll see in a moment, the restaurant business has come back.
Restaurants & Bars: Sales rose 1.8% in May from April, and are up 5.6% from May 2019, having fully recovered. There have been widespread price increases in restaurants, from fast-food restaurants to higher-end restaurants, and these price increases contribute to sales growth. In foodie cities like San Francisco, the restaurant scene is now booming.
General merchandise stores (minus department stores): Sales fell 4.2% for the month, to $56 billion, the second month in a row of declines, but were still up 16.3% from May 2019. The brick-and-mortar stores of Walmart, Costco, and Target are in this category; but their ecommerce sales are in nonstore retailers:
Building materials, garden supply and equipment stores: Sales fell 5.9% in May from April, the second month in a row of declines, to $40 billion, but were still up 28% from May 2019.
Price spikes, particularly of lumber products, have contributed to the spike. But potential lumber buyers have gotten the memo, and some have put projects on hold and have gone on buyers’ strike. In early May, lumber prices started plunging and have now unwound a portion of the price spike, but remain above the former WTF record price spike of September 2020. That buyers strike is starting to be visible:
Gas stations: Sales ticked up 0.7% for the month, to $46.3 billion. The price of regular gasoline, according to EIA data, increased by 5.7% at the end of May compared to the end of April. Sales in the past three months are the highest since 2014, with gasoline prices also being the highest since 2014:
Clothing and accessory stores: Sales rose 3.0% in May from April, to $25 billion, roughly flat with March, and up 14% from April 2019:
Furniture and home furnishing stores: Sales fell 2.1% for the month, to $12 billion, but were still up 24% from May 2019:
Department stores: sales rose 1.6% for the month and were about flat for the three-month period, at $11 billion, and were about flat with May 2019. This includes sales at the brick-and-mortar stores of Macy’s, Kohl’s, J.C. Penney, etc., but not sales in their ecommerce operations, which are included in nonstore retailers:
Sporting goods, hobby, book and music stores: Sales ticked down 0.8% in May from April, to $9.6 billion, second month in a row of declines, after the WTF stimmie spike in March. This left sales up 42% from May 2019:
Electronics and appliance stores: Sales fell 3.4% in May from April, after the WTF spike in March, and were up just 0.9% from May 2019. Most consumer electronics and many appliances are sold via ecommerce channels, and have been booming for years, leaving brick-and-mortar sales where they’d been in 2005:
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