Despite massive price hikes, retail sales plummet: buyers’ strike and fading stimuli shake WTF peak

Americans have to pay more for less.

By Wolf Richter for WOLF STREET.

“It’s going to be tough in May,” I said a month ago, discussing retail sales fueled by stimuli in April. And that’s what it was. Retail sales in May, at $ 620 million seasonally adjusted, were down 1.3% from April and a slight decline from March as well, according to the Commerce Department today. But retail sales have remained historically very high, fueled by residual incentives, and by gains from market mania, and most importantly, by inflation.

There have been massive price increases in the most important segments of retail sales, including sales at auto and parts dealers (these retailers account for 22% of total retail sales), where prices have increased. soared in the stratosphere, including in used vehicles with an 18% price spike in the two months following March. These price increases drive up total retail sales in dollars, as Americans have to pay more to get less:

New and used car dealers and parts stores: Sales fell 3.7% in May, to $ 136 billion seasonally adjusted, following the WTF’s historic peak in April and March. And sales have plummeted despite the huge price increases.

People find out and some potential buyers go on strike. This is why a 30% year-over-year increase in used vehicle retail prices – and a 45% increase in used vehicle wholesale prices – cannot last and will reverse. , but will not subside completely, and prices will remain relatively high. , as price pressures shift to other products or services:

For your entertainment, below is the used vehicle CPI with this phenomenal 30% year-over-year spike, triggered by an 18% price spike in the past two months. Automobile purchases are mostly discretionary. Most people can delay purchasing a vehicle for a year or two or more. This was proven during the financial crisis, when auto buyers went on strike and vehicle sales plunged and remained weak for years. In today’s retail data, there is already a first glimpse of an ongoing buyers’ strike (the chart shows the value of the CPI for used vehicles and not the percentage change From one year to another).

The who’s who of the retailer segments.

Auto sales are unchallenged in the United States, typically accounting for over one-fifth of total retail sales (black line). Sales at non-store retailers, primarily e-commerce, have become number two over the years (top red line). Sales in grocery and beverage stores are at number 3 (green line). Sales in bars, restaurants and other “food services and drinking places” are ranked # 4 (purple line), having been surpassed by non-store retailers in 2019. Sales in general merchandise stores, at excluding department stores, are No. 5 (yellow line). Department stores are near the bottom:

E-commerce and other “non-store retailers”: sales fell slightly by 0.8% in May from April, to $ 88 billion, seasonally adjusted. Compared to May 2019, sales increased by 33%. This category includes e-commerce, including e-commerce of traditional retailers such as Macy’s, mail order operations, street stalls, vending machines, etc.

Food and beverage stores: Sales increased 1.0% in May of April to $ 74 billion, roughly the same as May 2020, but up 17.1% from May 2019. Working from home, reducing restaurant visits, and so on. have shifted part of consumption from places of business to households, and therefore to retail stores. But as we’ll see in a moment, the restoration has returned.

Restaurants and bars: sales increased by 1.8% in May from April, and are up 5.6% from May 2019, after fully recovering. There have been widespread price increases in restaurants, from fast food outlets to high-end restaurants, and these price increases are contributing to sales growth. In foodie cities like San Francisco, the restaurant scene is now booming.

General merchandise stores (minus department stores): Sales decreased 4.2% for the month, at $ 56 billion, the second consecutive month of decline, but was still up 16.3% from May 2019. Physical stores at Walmart, Costco, and Target fall into this category; but their online sales are at non-store retailers:

Building material, garden supplies and equipment stores: Sales were down 5.9% in May from April, the second consecutive month of decline, to $ 40 billion, but was still up 28% from May 2019.

Spikes in prices, particularly of lumber products, contributed to the surge. But potential lumber buyers received the note, and some put projects on hold and called buyers’ strike. In early May, lumber prices started to plunge and have now offset part of the price spike, but remain above the former WTF record price spike of September 2020. This buyers’ strike is starting to be visible :

Gas stations: sales increased 0.7% for the month, at $ 46.3 billion. The price of regular gasoline, according to EIA data, rose 5.7% at the end of May compared to the end of April. Sales for the past three months are the highest since 2014, with gasoline prices also the highest since 2014:

Clothing and accessories stores: sales increased 3.0% in May from April, to $ 25 billion, roughly stable with March, and up 14% from April 2019:

Furniture and home furnishings stores: Sales fell 2.1% for the month, at $ 12 billion, but were still up 24% from May 2019:

Department stores: sales up 1.6% for the month and were roughly flat for the three month period at $ 11 billion, and were roughly flat with May 2019. This includes physical store sales of Macy’s, Kohl’s, JC Penney, etc. , but not sales in their e-commerce operations, which are included in non-store retailers:

Sporting goods, hobby, book and music stores: Sales fell 0.8% in May from April, to $ 9.6 billion, the second consecutive month of decline, after the WTF stimulus 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 peak in March, and only increased 0.9% from May 2019. Most consumer electronics and many home appliances are sold through channels e-commerce and have been booming for years, leaving physical sales where they were in 2005:

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