Americans Are in a Sour Mood, But it Didn’t Dampen their Spending: Splurging at Retailers, Especially Some Retailers

Americans Are in a Sour Mood, But it Didn’t Dampen their Spending: Splurging at Retailers, Especially Some Retailers

Retail Therapy at Bars & Restaurants, Cannabis Stores, and Ecommerce? Other retailers not so lucky.

By Wolf Richter for WOLF STREET.

Retail sales jumped 0.9% in April from March, after having jumped 1.4% in March from February, to $678 billion, and were up 8.2% from a year ago, seasonally adjusted, the Commerce Department reported today. Retail sales are sales only of goods, not services. And we’ve been seeing for months now a widespread shift in consumer spending from goods back to services, where spending had collapsed during the pandemic, but is now surging.

These retail sales today confirm this trend: Despite the shift of spending to services, consumers are still spending huge amounts on goods, and growth in retail sales is somewhere near the rate of inflation, with “real” growth (adjusted for inflation) trending down, as spending on services, adjusted for inflation, more than makes up for it.

Consumers are in a Sour Mood, but hasn’t dampened their spending.

Raging inflation has outpaced the income growth of many Americans, and they’re also shifting spending into services. And yet, retail sales have continued to surge, including ecommerce sales. What is fascinating, in terms of shifts, is that there is a big boom going on at bars and restaurants, and at miscellaneous stores, which prominently include cannabis retailers – where sales far outpaced the rate of inflation.

This surge in sales is happening even as consumer sentiment in May has dropped to a decade low, according to the University of Michigan Consumer Sentiment Survey. Overall sentiment was beaten down by worries about raging inflation that has spread across all sectors of the economy and is hitting consumers in face every day (data via St. Louis Fed and University of Michigan Survey of Consumers):

Retail therapy? It’s as if consumers are trying to overcome their grief and anger over inflation with some classic retail therapy to make them feel better — and they’re doing it in bars & restaurants, specialty stores that include cannabis stores, and with ecommerce. Other retailers are not so lucky.

Sales at New and Used Vehicle and Parts Dealers, the largest retailer category, rose by 2.2% in April from March, to $132 billion, seasonally adjusted, but were down 1.7% from a year ago. Used vehicle prices have started to tick down on a month-to-month basis, though they remain much higher than a year ago, while new vehicle prices continued to spike at record pace as new vehicle dealers are woefully low on inventory. And retail sales in dollar terms are the result of this mix:

Sales at ecommerce and other “nonstore retailers” rose 2.1% seasonally adjusted in April from March, to $107 billion, and were up 12.7% year-over-year. This is the second-largest retailer category and includes the ecommerce operations of classic brick-and-mortar retailers, such as Walmart:

Food and Beverage Stores: Sales dipped 0.2% for the month to $77 billion, seasonally adjusted, but were still up by 7.1% year-over-year, powered entirely by price increases:

Food services and drinking places: Sales at these bars, restaurants, cafes, cafeterias, etc. jumped by 2.0% for the month seasonally adjusted, to a record $84 billion, and by 19.8% year-over-year. This growth rate is nearly three times the rate of CPI inflation for “food away from home” (7.2%), which indicates that people are going out to splurge and enjoy and perhaps douse their sour mood with the appropriate liquidity, and they’re spending heroic amounts of money to do it.

General merchandise stores: Sales were essentially flat for the month, at $57 billion, seasonally adjusted, and ticked up only 0.8% from the stimulus fueled April a year ago. Walmart and Costco are in this category, but not department stores.

Gas stations: Sales fell by 2.7% for the month, on falling gasoline prices, to $62 billion, seasonally adjusted. Year-over-year, sales were still up by 36.9%, powered entirely by the year-over-year spike in gasoline prices.

Building materials, garden supply and equipment stores: Sales were about flat for the month, at $43 billion, for a year-over-year gain of 1.7% from Stimulus Miracle April:

Clothing and accessory stores: Sales rose by 0.8% for the month, and by 8.0% year-over-year to $26 billion, seasonally adjusted:

Miscellaneous store retailers (includes cannabis stores): Sales spiked by 4.0% for the month to a record $15.9 billion (seasonally adjusted), and were up by 19% from a year ago. This category tracks specialty stores, including cannabis stores that have become one of the hottest trends in brick-and-mortar retail, as some of the black-market business is coming above ground:

Department stores: sales rose 1.1% for the month, to $11.5 billion, and were up 2.9% from a year ago. Price increases made up for volume declines. Compared to the peak in the year 2000, sales were down 42%, as this format of store has fallen out of favor with Americans, triggering the closure of thousands of stores and numerous bankruptcies:

Furniture and home furnishing stores: Sales rose 0.7% for the month (seasonally adjusted), and at $12 billion were up just 0.8% year-over-year, despite price increases:

Sporting goods, hobby, book and music stores: Sales dipped 0.5% for the month, to $8.9 billion (seasonally adjusted), and were down by 5.4% year-over-year:

Electronics and appliance stores: Sales rose 1.0% for the month, to $7.8 billion, seasonally adjusted, but were down 5.2% year-over-year. This segment covers only sales in specialty electronics and appliance stores, such as Best Buy or Apple stores. Electronics and appliances are a large business that is spread across many types of retailers, such as General Merchandise and ecommerce retailers, and electronics and appliance sales at those retailers are included in their segments (above).

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