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06-16-20 | Economic News

Consumer Spending Bounces Back

Could Mean Shorter Recession than Predicted

May's record increase in consumer spending was more than double the consensus expectation.

May retail sales were 17.7% above sales in April, which was, by far, a record month-to-month increase. Expectations had been set at an 8.4%, gain and that would have been a record also.
Granted, this all came on the heels of back-to- back record declines, but the size of the growth resulted in retailers seeing more than half of the lost spending return, meaning sales, after being down more than 20%, are now off only about 8% since February.

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Almost every category of retailing set a record for month-to-month gains excpet grocery stores, health/personal care, general merchandise and non-store retailers, although grocery, health and general merchandise stores, posted record monthly improvements in March due in large part to panic buying.

In their statement regarding these numbers, the Wells Fargo Economics group said, "The places we are still seeing activity even as many are still working from home translates directly into the store types that are flourishing amidst this pandemic."

This includes sporting goods and home improvement stores. However, "with many people still working from home, there has been little need to freshen up the wardrobe, so sales at clothing stores are still less than half of what they were in February. People still aren't driving as much so gas station sales are still down more than 20% from the February level, as are other categories like restaurants, electronics and furniture stores.

"While we do not expect a monthly gain of this magnitude to be repeated in June retail sales, we do think record household savings augers well for sustained consumer spending growth in the second half of the year. If this keeps up, we could be looking at a short recession."

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