Retail Sales Fall in May

By at 15 June, 2021, 1:13 pm


Retail and food services sales moved down in May, according to the latest report from the U.S. Census Bureau. After an increase of 0.9 percent in April, sales declined by 1.3 percent in May.

The Distortion of Government Money

It remains difficult to get a read on retail sales given the distortive effects of government aid. As SBE Council has pointed out previously, there have been three rounds of government aid payments – starting in March 2020, December 2020 and March 2021 – and the effects have been temporary.

That has been the case with the most recent round, as retail sales jumped in March, saw continued growth in April, but then experienced this latest decline in May.

To put things in perspective, let’s look at two charts on monthly percent changes in retail and food services sales. The first chart looks at data going back to 1992, and one immediately sees how far outside the norm lies this recent period of pandemic and government aid. The second chart shows the impact of the pandemic and the temporary hits to sales from the government aid checks.

Source: Federal Reserve Bank of St. Louis, FRED

Source: Federal Reserve Bank of St. Louis, FRED

The Trends and a Few Fundamentals

Again, it’s difficult to get a clear picture of any trends here. However, we can be sure of a few things.

First, government aid checks and their effects are temporary.

Second, there are near and longer term costs to having government draining resources from the private sector, and redistributing them.

Third, the health of retail sales obviously is tied to the well-being of the consumers, and that in turn, relies upon the state of business, specifically, new businesses being created; there being strong investment in expansion and in productivity and income-enhancing technologies and tools; and stepped up hiring.

It is important to keep in mind a fundamental point that SBE Council emphasizes when looking at consumption-based data, such as retail sales. That is, consumers are followers, and they spend when businesses are being created, investing and hiring.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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