Every month, the U.S. Department of Commerce, Census Bureau, releases its first calculation of the previous month’s retail sales. At Retail Dive, we report these figures by grouping the key segments that define “retail” in a way that we hope is most meaningful to the industry.
We use unadjusted, advance numbers and year-over-year comparisons, with the government’s most recent revisions to its year-ago estimates. And although we of course include e-commerce, captured in the federal report as “nonstore retailers,” readers will note that the government includes sales from businesses not generally thought of as “e-commerce.”
YoY sales performance by sector
Monthly retail sales
How key retail sales fared year over year
Total sales+7%Non-store+18%Clothing & accessories+4%Furniture & home+0%General merchandise-1%Sporting goods, hobby, bookstores-1%Electronics & applicances-6%
- May 2022Total monthly sales: $224.00B
In May, retail sales in the segment followed by Retail Dive rose 7.2% year over year and 31% compared to 2019, according to numbers released Wednesday by the U.S. Commerce Department. With May’s inflation rate reaching 8.6%, however, retail sales were closer to flat compared to last year.
Still, that indicates a fairly steady consumer so far this year, analysts said. Many households tapped their savings and turned to credit cards in the period, according to Wells Fargo Economists Tim Quinlan and Shannon Seery. Non-revolving consumer credit posted its largest monthly increases on record in the past two months, they noted in emailed comments Wednesday.
“Despite the highest inflation in 40+ years, consumers have demonstrated uncanny staying power thus far in 2022,” they also said, but warned that “the factors that have sustained spending thus far are getting near the end of their rope, and we are increasingly concerned that goods spending will slow sharply and that will be particularly evident in retail sales which is mostly a measure of goods spending.”
Inflation has had some impact on nearly all consumers, and that’s especially profound for households that were already struggling, according to research from Numerator. Shoppers are searching out coupons and promotions (50%) and stocking up on sale items (51%), with 66% of struggling households cutting back on nonessential spending, per that report.
“Our data now show a clear pattern of more consumers taking evasive action to reduce their food bills by visiting cheaper stores more often, trading down to lower cost brands, and buying into more bargains and offers,” GlobalData Managing Director Neil Saunders said in emailed comments. “These indicators show that many households are under financial pressure.”
This hit to demand at the same time that gas and food prices are rising “will unravel many business models, especially on the top-line,” he also said.
Despite the pullback on discretionary spending, many consumers continued to refresh their closets. But inflation takes credit for much of apparel’s 3.5% rise year over year, and sales of home goods, electronics, sporting goods and department stores were significantly weaker or down, even before accounting for inflation.
“Overall, the results from May do nothing to change our view that while retail growth is moderating it is witnessing a relatively soft landing on the sales front,” Saunders said. “There is no abrupt curtailment of spending and while there [are] most certainly shifts in how and what people buy, these are relatively subtle and are somewhat masked by inflation. That does not mean retailers can relax completely.”
- April 2022Total monthly sales: $225.53B
The pandemic is still a challenge to human health, inflation is hitting household budgets and supply chains remain roiled, yet consumers are returning to a semblance of normal spending behavior. Retail sales in the segments followed by Retail Dive rose 11.3% year over year in April, as e-commerce sales rose 24.1%, according to numbers released Tuesday by the U.S. Department of Commerce.
“It is inevitable that when prices grow faster than wages, at some point difficult choices will have to be made...but not today,” Wells Fargo Economists Tim Quinlan and Shannon Seery wrote in emailed comments Tuesday.
Not all sectors fared well. Furniture and home goods, which flourished during the height of the pandemic, dropped 0.5%; sporting goods sales fell 5.5% and electronics sales fell 4.1%, according to the report. But apparel was in demand, as sales rose 8.9% and department store sales rose 7.8%.
The recovery against pandemic-dominated 2020 was stark, as overall retail sales jumped 57.8% and e-commerce rose 39.9%, with all sectors posting gains. Home goods sales rose 212.1%; electronics sales rose 116.9%; sporting goods sales rose 151.9%; and apparel sales rose a whopping 784.8%. Even department stores fared well compared to two years ago, with sales up 86.4%.
But retailers did well even compared to pre-pandemic 2019, as sales rose 40.5% and e-commerce rose 76%. Home, apparel and sporting goods all saw double-digit growth compared to three years ago.
“Such dramatic uplifts underline the fact that the pandemic-boom has not yet ended, even if its impact is fading,” GlobalData Managing Director Neil Saunders said in emailed comments.
Sales also benefited from late Easter and Passover and from tax refunds, many of which are also late but larger than usual, according to NRF Chief Economist Jack Kleinhenz. Job and wage gains are also helping offset inflation, he said.
Supply chain issues and a “winding-down of pandemic-demand” explain the slowdown in electronics and home, at least in part, Saunders said. There are some signs of caution among consumers, however, even in the segments with elevated sales. And some retailers will face a margin and profit squeeze in coming months, as they balance lower volumes with higher costs, he said.
Indeed, inflation and supply chain issues appear to be taking a toll on consumer confidence. On Friday the University of Michigan found consumer sentiment to be at its lowest point since 2013, and the multiple pressures on consumers are intensifying, according to Wells Fargo’s economics team.
“Inflation has been a worsening nuisance for the better part of the past year, but there is something about mortgage rates over 5% and gasoline over $4/gallon that really focuses the attention of consumers,” Wells Fargo economists said. “It’s one thing when you have to wait for a new appliance, and even though the causes might be the same, it is an altogether different kind of supply chain problem when you cannot get formula for your newborn. …[C]onsumers are feeling awful.”
This means that retail is entering a more difficult period, Saunders said. “However, we are also of the opinion that the landing looks to be a relatively soft one, at least in demand terms.”
- March 2022Total monthly sales: $217.81B
Consumers in March pulled back on their acquisition of goods, as they sent more dollars toward experiences like dining out and inflated prices on food and fuel. Last month, in the cohort of segments tracked by Retail Dive, retail sales rose 2.9% year over year, the slowest growth in nearly two years, according to GlobalData research.
“Retail purchases have been expected to drop as the services economy comes out of the COVID shadow, and consumers switch from more spending on goods to more spending on services,” Robert Frick, corporate economist with Navy Federal Credit Union, said in emailed comments. “But retail purchases are still above the pre-COVID trend, even excluding gasoline. Overall, despite the shock of higher gas prices and high inflation overall, consumers are more than holding their own.”
While positive, the year-over-year uptick was meager compared to last year: March retail sales in the group rose 28.5% in 2021. Last month, e-commerce growth was especially soft, rising 2.6% year over year, the weakest gain in more than three years, according to GlobalData.
The switch to higher spending on services (and on categories like fuel affected by inflation) siphoned spending on goods — and looks to be creating winners and losers in retail, according to GlobalData Managing Director Neil Saunders. The big boom in home goods (up 4.2% year over year), apparel sales (up 7.5%) and at department stores (up 3.3%), slowed somewhat in March, while electronics sales dropped 9.6% and sporting goods sales dropped 5.7%.
Still, consumers demonstrated resilience in March, a good sign given that inflation may be moderating, according to Wells Fargo Economists Tim Quinlan and Shannon Seery. “Inflation is not going away, but it will likely stop getting worse and that means less of a headwind for spending,” they wrote in an April 14 research note.
But spending on what? This year, retailers may come to look fondly on the last couple of years, when consumers were well supported by the federal government, and less able or less inclined to travel or dine out.
“Looking ahead, there is no need to be overly gloomy about retail,” Saunders said. “However, it is now very clear that 2022 will be a much tougher year. Ironically, while the pandemic years delivered a boom in spending, the post-pandemic period will be much more frugal.”
- February 2022Total monthly sales: $191.41B
Thanks to the availability of vaccines, ability to shop in stores, wage growth and in some cases healthy savings, consumers by and large brushed aside inflation concerns in February. The retail segments tracked by Retail Dive saw sales spike 14.3% year over year last month, with apparel sales soaring 31% and even department stores up 22.4%, according to numbers released Wednesday by the U.S. Commerce Department. Advancement from before the pandemic slammed retail was also robust, up 22.5% compared to February 2020 and a whopping 31.9% from 2019.
“Continued interest in fashions for socializing, vacations, and refreshing closets is still in play and is fueling consumer activity,” GlobalData Managing Director Neil Saunders said in emailed comments. “However, we have also detected some trading down with more shoppers turning to off-price, resale and value players for some of their purchases. This is likely in response to squeezed budgets.”
Higher prices helped push home goods sales up 7.4%, but GlobalData found that consumers also picked up the pace again on home-based projects after the holidays.
As Saunders and other analysts noted, price hikes did cast a shadow over the results, as the Census Bureau’s retail sales numbers aren’t adjusted for inflation. Still, nonessential retail prices have remained fairly steady, with food and fuel driving the biggest household expense increases: Core retail prices last month rose 0.4%, compared to the overall 1.3% rise, according to research from Wells Fargo economists.
The situation is likely to pinch the industry more in coming months if rising prices on staples continue to encroach on discretionary spending, however, several analysts warned. While shoppers were out spending, including at restaurants, inflation and Russia’s war on Ukraine are already shaking consumer confidence, analysts said.
“Consumers remain well supported by tight labor market conditions, strong wage gains, and excess savings accumulated over the past few years,” Plante Moran Financial Advisors Chief Investment Officer Jim Baird said in emailed comments. “Unfortunately, those dollars just aren’t going as far as anyone would like, as surging prices weigh on consumer sentiment and take a bite out of real growth.”
- January 2022Total monthly sales: $192.95B
January retail sales in the group followed by Retail Dive rose 6.4% year over year, a considerable slowdown from last year’s 13% rise, according to numbers from the U.S. Commerce Department released Wednesday. Notably, non-store sales (mostly e-commerce) rose 4.1%, compared to their 26% year-over-year increase in 2021, with GlobalData analysts finding that e-commerce penetration fell to 14.7% of retail, after two months above 16%.
GlobalData also estimates that inflation contributed 6.9 percentage points of January’s overall retail sales. Retailers’ prospects could dim this year if households begin to feel price hikes more acutely, according to GlobalData Managing Director Neil Saunders. “Although some lower income cohorts are now having to make tough choices about what to buy, many others are not yet at the point of radically changing their spending patterns,” he said in emailed comments. “Unfortunately, if inflation persists and interest rates rise, we believe this reality will start to bite later in 2022. In this sense, retail is probably currently living on borrowed time.”
Indeed, year-over-year January retail sales numbers from Affinity Solutions suggest that spending among lower-income consumers was down significantly year over year, while spending among wealthier consumers is rising — a reversal of behavior seen earlier in the pandemic and a glaring sign that the country’s wealth gap persists, according to Affinity CEO Jonathan Silver.
Real disposable income is down in part because the government is not supporting consumers as much this year, although many have built up their savings over the past two years and, for now, are in decent financial shape, according to research from Wells Fargo economists. To the extent that consumers do hang on to their spending power, more dollars are likely to go to services as the year goes on, Wells Fargo economists Tim Quinlan and Shannon Seery said.
Category-based spending patterns are also shifting somewhat. Along with the pullback in online sales, home goods sales rose just 5.8% year over year, compared with their 9.8% rise a year ago. But apparel’s comeback continues, with clothing sales up 24.3% and department store sales up 14.1%, both improvements over what those segments posted a year ago.