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Data released on Tuesday showed a decline of 1.3% in retail sales in May, with positive revisions to April’s numbers. Mask mandates were lifted mid-month and what emerges is exactly what we should hope to be seeing: splurging on big-ticket items and fixing up the house is out; going out to eat and reconnecting with family and friends is in, argue analysts at Well Fargo.  

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“The monthly retail sales figures are typically a good proxy for consumer spending more broadly, but because of the unique characteristics of this cycle and where we are in terms of returning to some semblance of normal consumer activity, it may not be the best barometer for a few months. Retail sales fell 1.3% in May, although the blow was cushioned by the fact that April figures were revised from flat to +0.9%.”

“There were a few silver linings in today’s report, other than the rise in restaurant sales. After a year at home, consumers are starting to venture out and many of the categories that posted higher sales in May suggest consumers first want to improve their appearance. Spending at clothing stores rose 3.0% in May, as we now have places to go but nothing to wear. This gain, however, was likely partly boosted by higher prices during the month, as last week we learned from the separately released CPI data, that consumer prices for apparel leaped 1.2% in May. Further indication of consumers gearing up for normal life was a pop in department store sales (+1.6%) and health & personal care retailers (+1.8%).”

“These categories of goods spending support a return to normal social activity and are encouraging signs that consumers are itching to get out and spend. The May report for retail sales therefore does not change our expectations and actually remains supportive for a boom in Q2 consumer spending.