Ake’s Take: Retail Sales Are Vibrant – Where Is The Money Going?

The federal government has pumped $850 billion of direct stimulus payments to citizens in response to the pandemic (Peter G. Peterson Foundation). In combination with the COVID health mobility restrictions, this cash infusion resulted in changes in retail spending patterns. Since the pandemic started, there has been a surge in retail goods spending as consumers had more money to spend and service spending was severely curtailed.

Currently, retail spending is being impacted by these changes in buying habits, the ongoing impacts of the pandemic, pent-up demand, and an excess of disposable income. Let’s examine the changes in consumer spending by comparing the retail sales by category from April 2021 versus April 2019 (pre-pandemic) as reported by the Census Bureau.  

Motor Vehicle and Parts Dealers

Sales up 36% (April 2021 vs. 2019)

The increase here is driven mainly by pent-up demand. Many people delayed new car purchases because they were driving less, working from home, and sheltering in place. The current surge in spending due to pent-up demand would also apply to used car purchases, routine maintenance, and tire purchases.

Extra disposable income could be fueling some purchases, but the restricted supply of new cars due to the semiconductor shortage is expected to limit near-term production. Regardless, expect healthy sales in this category in 2021.

Furniture and Home Furnishing Stores

Sales up 22% (April 2021 vs. 2019)

People confined to their homes invested in their homes during the pandemic. Furniture sales started to spike in June 2020 but have picked up speed in 2021. It is doubtful sales will remain at this level once people escape to the great outdoors this summer and more stimulus money gets spent on services.   

Electronics and Appliance Stores

Sales up 12% (April 2021 vs. 2019)

It appears that consumers did not invest heavily in home electronics in 2020 and may have delayed purchasing new appliances. Purchases may have been limited by a shortage of home appliances available for sale. Now that economic conditions and availability are improving, sales in this category are surging but are not yet significantly higher than in 2019.

Building Material and Garden Equipment and Supplies Dealers

Sales up 40% (April 2021 vs. 2019)

The pandemic created a surge in home improvement spending, as people were stuck at home, had plenty of free time, and had plenty of cash available for new projects. Despite the loosening of restrictions, the trend is not only continuing, but accelerating in 2021.

Food and Beverage Stores

Sales up 14% (April 2021 vs. 2019)

This segment is tracking in a steady, normal range. The gain over 2019 is reasonable in a flourishing economy. Stimulus money could be bumping the total a modest amount.

Sporting Goods, Hobby, Book, and Music Stores

Sales up 42% (April 2021 vs. 2019)

These stores benefit when disposable income increases. So, it is no surprise that sales jumped in June 2020, about the time of the first stimulus payments. The volume then held steady through 2020. However, sales have spiked in March and April, as the latest round of stimulus checks provided consumers with more discretionary cash.

Health and Personal Care Stores

Sales up 13% (April 2021 vs. 2019)

Spending here was stable through 2020 as people emphasized their health conditions during the pandemic. Sales have increased recently, maybe reflecting a renewed attention to health and beauty as public interactions increase.

Gasoline Stations

Sales up 6% (April 2021 vs. 2019)

It appears road traffic is getting back to pre-pandemic levels.

Clothing and Accessories Stores

Sales up 5% (April 2021 vs. 2019)

After suffering mightily in 2020, as people sheltered in place, sales began to recover last September. Activity then jumped in March as people started to regather. This segment should continue to increase due to pent-up demand and ample disposable income.

Non-Store Retailers

Sales up 42% (April 2021 vs. 2019)

Absolutely no surprise here since e-commerce spiked during the lockdown. Sales surged at the beginning of the pandemic, accelerated in October, and are higher still in 2021.

General Merchandise

Sales up 9% (April 2021 vs. 2019)

Despite the gain in e-commerce, this segment still shows a gain. This exemplifies the impact the stimulus payments have had on retail sales.

Miscellaneous Store Retailers

Sales up 25% (April 2021 vs. 2019)

This category didn’t dip that much during the shutdown and then recovered quicker. Sales have accelerated in March and April as consumer mobility increases.

Outlook

Retail sales have been robust, as consumers spend their stimulus dollars on a wide variety of products. The big question is: Will retail sales dry up when the stimulus spending ceases? It appears that while sales growth will slow in 2021, there will be enough momentum generated to keep retail sales at lofty levels through the end of the year.