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Cautious Optimism After May Retail Sales Report

Pent-up demand from two months of shutdowns prompted by the COVID-19 pandemic spurred a 17.7 percent seasonally adjusted increase in retail sales from April, when they were off 14.7 percent from March. But overall May sales were down 6.1 percent year-over-year, with some categories off substantially.

 “I think a lot of it is lockdown fatigue,” Beth Ann Bovino, chief U.S. economist for S&P Global, told the New York Times in assessing the monthly sales improvement. “I would caution not to be fooled by this large gain. We still have a long way to go in repairing the economy.”

 Nonetheless, Wall Street was encouraged by the higher consumer spending, helping to push the Dow Jones Industrial Average higher yesterday. But critics contend the retail sales bump could wane by the drying up of federal stimulus payments to consumers or a rise in COVID-19 cases in some states.

 The monthly U.S. Census Bureau data released yesterday showed a 188 percent month-over-month seasonally adjusted increase in clothing and clothing accessory store sales and an 88.2 percent jump in month-over-month sporting good store sales. May shoe store sales weren’t reported, but the segment suffered a nearly 75 percent decline between March and April.

National Retail Federation chief economist Jack Kleinhenz, however, questioned the reliability of the May sales figures, as stores in many areas remained closed during the month and retailers were not in their offices to respond to the monthly federal survey.

Federal Reserve Chairman Jerome Powell voiced caution about the economy’s overall health yesterday in comments to a Senate committee, stating “levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery.”