May Retail Sales Will Support Or Refute NRF’s Optimistic Outlook

By this time Tuesday (June 15), economists, investors and retail industry watchers will know exactly how fast the consumer shopping surge grew last month after the Commerce Department releases its latest monthly report at 8:30 a.m. EST.

After a lackluster and unexpected stall in the April data, economists are forecasting that May’s sales will also show a month-on-month decline, with average estimates projecting a 0.7 percent slide in the activity in May.

That forecast is in stark contrast to a stream of recent anecdotal data from a range of retailers, including Williams Sonoma, Costco and Gap, that have reported customers are happy to be back out and shopping again.

It is also in contrast with the National Retail Federation’s latest outlook which predicts the fastest growth in the U.S. in almost 40 years. That forecast, which was released June 9, not only projected “the fastest growth that we’ve seen in this country since 1984,” but painted a robust vision of the U.S. economy rebounding faster than expected from the malaise triggered by the pandemic.

Officially the NRF sees sales growing by 10.5 to 13.5 percent to an estimated to as much as $4.6 trillion in 2021, as customers spend money they have socked away, NRF chief economist Jack Kleinhenz said, noting that the forecast includes store and online sales, but not automobile dealers, gas stations and restaurants.

That compares with $4.02 trillion in total retail sales in 2020 and $3.76 trillion in 2019.

The industry group had forecast in February that retail sales would rise between 6.5 percent and 8.2 percent, amounting to more than $4.33 trillion in sales for the year.

The NRF also increased its projection for full-year GDP growth to about 7 percent, compared with the 4.4 to 5 percent it expected earlier this year. It said it anticipates pre-pandemic levels of output to return in this fiscal quarter.

Both Could Be Right

While the short-term contrast between the government’s retail results and the industry’s largest private trade association is stark, it is still possible that the short-term data is not fully reflecting a broader long-term trend yet.

If nothing else, the Commerce Department’s April report showed how quickly the benefits of $1,400 stimulus checks enter and exit the equation, with March delivering a record 10.7 percent spike in retail activity, but no follow-through in April.

Price increases, including gasoline, will also play an increasing role in consumer shopping habits, as will seasonal activities and travel-related buying during the peak summer vacation season. The pace of growth for so-called non-store or eCommerce sales is also projected to moderate from the rapid expansion realized in the early months of the pandemic lockdowns of 2020. Last month, eCommerce sales were down 0.6 percent after rising almost 5 percent in March.

To that point, a week from now, more real-time, real-world data will be available as Amazon’s annual Prime Day sales events kicks off, as well as several other clone sales being offered both online and in-store by Walmart, Target and other retailers that are increasingly looking to challenge the Seattle retailer’s digital dominance via fast delivery or curbside pickup options.