Easing of Coronavirus Restrictions Spurs Retail Sales

BY DICK STORAT

Consumer purchases reignited economic activity in May as restrictions to contain the coronavirus were eased across most of the United States. Retail and food service sales, which include purchases at stores, restaurants, and online, rebounded strongly to mark the end of the first plunge of economic activity. These sales rose by an unprecedented 17.7% in May, more than erasing April’s record 14.7% nosedive. The wild swing in sales reflects the shock of shutting down an economy that had been growing at a steady pace and its surprisingly rapid initial rebound.

Amid these record-breaking changes, some sectors have fared better than others. This article will assess each of the major sectors of retail and food service

Retail Sales Percent Change Retail Sales Percent Chang January–May 2020 e January–May 2020

Grocery Stores

Building Materials

General Stores

Retail Sales

Motor Vehicles

Drugstores

Furniture

–23.8% –0.7%

–3.7%

–6.6%

–10.1%

Others

Appliances

Restaurants

–26.6%

–30.4%

–41.1%

Clothing

–63.9%

–80%

Source: U.S. Census Bureau

–60% –40% –20% 0%

12.7%

7.1%

20% 40%

sales to provide independent paper packaging converters with insight into areas of strength and weakness that may be valuable if the economy enters a roller coaster ride of ups and downs in the months ahead.

The chart on page 4 shows the percent change in retail and food service sales between January and May 2020 by major component. The table at right breaks down the five months into the downslide between January and its end in April and the subsequent gains in May. It also shows the change in share of sales at the beginning of the year and in May after substantial sales redistribution took place.

Nonstore retailer sales consist primarily of e-commerce sales. They grew the most of any component as quarantined consumers turned to purchasing goods online. These sales grew by 27% between January and May, with 16% growth between January and April, when sales through every other retail channel except grocery stores declined. As a result of this rapid growth, nonstore retailers’ share of retail sales jumped from 12.9% in January to 17.8% in May, an increase of 38%.

As most restaurants and other eating and drinking places were open only for takeout and delivery service, grocery stores were the beneficiaries, with sales growing by 12.7% during the first five months of 2020. Between January and April, sales grew by 11%, mostly in March. Sales picked up by an additional 2% in May, as some restaurant activity returned. Grocery stores also saw a rise in share between the beginning of the year and May, as their sales rose from 12.2% in January to 15% of total retail sales in May.

As a result of quarantine measures during the pandemic, restaurant sales tanked by 41% between January and May, exceeded only by decline in clothing store sales. There was a substantial recovery of 29% in May as consumers increased takeout and delivery orders and as restrictions

2020 Retail Trade Percent Change and Shares

Sector

Motor Vehicles Nonstore Retailers Grocery Stores General Stores Others Restaurants Building Materials Drugstores Clothing Furniture Appliances Source: U.S. Census Bureau

Jan.–April

–35% 16% 11% –6% –39% –54% –3% –10% –87% –60% –54%

April–May Jan. Share May Share

44% 19.9% 20.3% 9% 12.9% 17.8% 2% 12.2% 15.0% 6% 11.3% 12.3% 20% 11.6% 9.3% 29% 12.4% 8.0% 11% 6.4% 7.5% 0% 5.7% 5.6% 188% 4.2% 1.7% 90% 1.9% 1.6% 50% 1.5% 1.2%

were eased. While grocery stores and food service establishments each had a 12% share of total retail sales in January, the pandemic’s impact saw restaurants’ share decline to 8% in May, a 35% share decline from which total recovery will take a long time.

The other sector that saw growth as responses to the pandemic diminished overall economic activity was building materials. This category includes hardware, garden equipment and supply, and building and renovation material stores. As families spent more time at home, remodeling and repair activities increased, so those sales grew by 7.1% during the first five months of this year. Eleven percent growth in May more than erased declines earlier in the year. These outlets saw their share of sales rise from 6.4% in January to 7.5% by May.

General stores, a category that includes large-format stores and traditional department stores, managed to end the first five months of the year with only a 0.7% decline in store sales, as losses of 6% during the first four months of the year were nearly erased in May.

Motor vehicle sales include both new and used transportation equipment, car and truck sales, as well as repair parts. This category saw a 28% decline in sales during March, followed by further declines in April before a surprisingly strong 44% recovery in May. Five-month sales between January and May have dropped by 6.6%.

Clothing stores were especially hard hit by the economic turndown, posting a 63.9% loss in sales during the first five months of this year. Even though they recovered some lost ground in May, their share of retail sales dropped from 4.2% in January to 1.7% at the end of May.

While the strong initial recovery in May provides a measure of relief to retail merchants, continued spending growth will depend on the labor market’s recovery and consumer attitudes toward spending at pre-pandemic levels. Other wild cards include how government and consumers will respond if there are coronavirus flareups and whether Congress extends pandemic-related benefits.

Dick Storat is president of Richard Storat & Associates. He can be reached at 610-282-6033 or storatre@aol.com.