Americans are in a bad mood, but that didn’t cut their spending: Splurge at retailers, especially some retailers

Retail therapy in bars and restaurants, cannabis stores and e-commerce? Other retailers were not so lucky.

By Wolf Richter for WOLF STREET.

Retail sales increased 0.9% in April from March, after rising 1.4% in March from February, to $678 billion, and were up 8.2% from a year earlier, seasonally adjusted, the Department of Commerce. Retail sales are sales of goods only, not services. And we have seen for months a widespread shift in consumer spending from goods to services, where spending had collapsed during the pandemic but is now rising.

These retail sales today confirm this trend: Despite the shift from spending to services, consumers continue to spend heavily on goods, and retail sales growth is close to the rate of inflation, with “real” growth ( adjusted for inflation) with a downward trend. , as spending on services, adjusted for inflation, more than offsets it.

Consumers are in a bad mood, but they haven’t cut back on their spending.

Raging inflation has outpaced income growth for many Americans, and they’re also shifting spending to services. And yet, retail sales have continued to rise, including e-commerce sales. What is fascinating, in terms of change, is that there is a huge boom taking place in bars and restaurants, and in miscellaneous stores, most notably cannabis retailers, where sales far outstripped the rate of inflation.

This surge in sales is occurring despite consumer confidence in May falling to a decade low, according to the University of Michigan Survey of Consumer Sentiment. Overall sentiment was weighed down by concerns about raging inflation that has spread to all sectors of the economy and is hitting consumers every day (data via the St. Louis Fed Consumer Survey and the University of Michigan):

Shopping therapy? It is as if consumers are trying to overcome their pain and anger over inflation with some classic retail therapy to make them feel better, and they are doing so in bars and restaurants, specialty stores including cannabis stores, and e-commerce. Other retailers are not so lucky.

Sales at new and used vehicles and parts dealers, the largest retail category, rose 2.2% in April from March, to $132 billion, seasonally adjusted, but was down 1.7% from a year earlier. Used vehicle prices have started to decline month over month, although they are still much higher than a year ago, while new vehicle prices continued to rise at a record pace as new vehicle dealers have woefully low inventory. And retail sales in dollars are the result of this mixture:

Sales in e-commerce and other “non-store retailers” it rose a seasonally adjusted 2.1% in April from March, to $107 billion, and was up 12.7% year over year. This is the second largest category of retailers and includes the e-commerce operations of traditional brick-and-mortar retailers, such as Walmart:

Food and beverage stores: Sales fell 0.2% in the month to $77 billion, seasonally adjusted, but were still up 7.1% year over year, driven entirely by price increases:

Food services and places to drink: Sales in these bars, restaurants, cafes, coffee shops, etc. they increased 2.0% in the seasonally adjusted month, to a record $84 billion, and 19.8% year over year. This growth rate is almost three times the CPI inflation rate for “dining out” (7.2%), indicating that people are going out to splurge and enjoy and perhaps quench their bad moods with adequate liquidity, and are spending heroic amounts of money to do that.

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

Gas stations: Sales fell 2.7% in the month, due to the drop in gasoline prices, to $62 billion, seasonally adjusted. Year-over-year, sales increased 36.9%, driven entirely by year-over-year increases in gasoline prices.

Building Materials, Garden Supplies and Equipment Stores: Sales were nearly flat for the month, at $43 billion, for a 1.7% year-over-year gain for Stimulus Miracle April:

Clothing and accessories stores: Sales increased 0.8% in the month and 8.0% year over year to $26 billion, seasonally adjusted:

Miscellaneous store retailers (includes cannabis stores): Sales increased 4.0% for the month to a record $15.9 billion (seasonally adjusted) and were up 19% from a year earlier. This category tracks specialty stores, including cannabis stores that have become one of the hottest trends in traditional retail as some of the black market business comes to light:

Department store: sales rose 1.1% in the month to $11.5 billion, and 2.9% more than a year ago. Price increases offset volume declines. Compared to the 2000 peak, sales fell 42% as this store format has fallen out of favor with Americans, leading to thousands of store closures and numerous bankruptcies:

Furniture and home goods stores: Sales were up 0.7% in 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 fell 0.5% in the month to $8.9 billion (seasonally adjusted), and were down 5.4% year-over-year:

Electronics and appliance stores: Sales rose 1.0% in the month to $7.8 billion, seasonally adjusted, but fell 5.2% year over year. This segment covers only sales at specialty electronics and appliance stores, such as Best Buy or Apple stores. Electronics and home appliances is a big business that is distributed among many types of retailers, such as e-commerce and general merchandise retailers, and sales of electronics and home appliances at those retailers are included in their segments (above).

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