Tue. Jan 31st, 2023

If you were looking for a reliable signal on where U.S. consumer spending is heading in the May retail sales report, well, good luck.

The Commerce Department on Tuesday reported that combined sales at stores, restaurants and online fell by 1.3% last month from April, a steeper drop than the 0.6% decline economists expected. The weakness was broad based, with sales declining at auto dealers, hardware stores, furniture sellers and general merchandise stores, among others. Sales at restaurants and bars bucked the trend, rising 1.8%, but given the easing of the Covid-19 crisis, one might have hoped for more.

The April sales figures were revised significantly higher, however, and March sales figures were also bumped up. The Commerce Department now says overall sales in April were up 0.9% from March compared with its earlier reading showing they were flat, with most retail categories showing higher sales. Indeed, after taking the revisions into the account, the level of retail sales last month was higher than economists’ May sales estimates indicated.

Data revisions happen—the sample of retailers and food service firms that the Commerce Department bases its initial sales figures on is smaller than the one it uses for the revised figures it releases later—and given the economic environment now, those revisions may end up being bigger than usual.

There is a lot going on. Earlier this year, the government sent out another big round of relief payments to most U.S. households. The initial boost they gave to spending is probably fading. With worries about Covid-19 and restrictions easing, more Americans are returning to activities they have avoided, such as eating out at restaurants, and that may be redirecting some of their dollars away from other purchases. Furthermore, supply-chain problems have led to shortages of a broad array of products. Last month, the economy added over a half-million jobs—and the paychecks that come with them—and that was considered a mild disappointment.

The likeliest outcome is still that spending will continue to push higher in the months ahead, as the economy continues to emerge from the Covid-19 pandemic, and Americans make up for all the things they have been missing out on.

But with so many moving parts, relying on a single report to tell the story of what is happening with consumer spending is no easy task. And even if you do manage it, a month later that story could get revised away.

Write to Justin Lahart at [email protected]

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By rahul