forecasting
SCI
May wasn’t exactly a banner month for consumer spending on goods. Retail and food service sales dropped 0.9% month over month, seasonally adjusted. The biggest hit came from a steep decline in vehicle sales after consumers rushed out in March and April to buy cars, trucks, and SUVs ahead of tariff-driven price increases.
Even if you take cars and trucks out of the picture, though, things still looked pretty soft. Excluding automotive, sales slipped 0.3%. And if you also remove gas station sales (which dropped 2% due to falling price), retail and food service sales weren’t even flat, easing 0.1%.
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A few areas of retail saw meaningful increases, but they happened to be in minor categories – sporting goods, furniture, and clothing, for example. Another major retail sector – general merchandise stores – did see an increase but only a marginal one, ticking up just 0.1% m/m.
Retail did see one major sector perform well, and it is the one category that has seen nearly unbroken growth for years.
Nonstore retail keeps climbing
What was May’s one bright spot? Nonstore retail – essentially goods purchased online. Nonstore retail sales rose just under 1% from April, seasonally adjusted. That’s hardly a robust performance but compared to other major categories it’s a big winner.
Other than its relatively stronger performance in May, why highlight nonstore retail? It’s because the modest gain coupled with broad weakness elsewhere resulted in nonstore accounting for 17.5% of all retail and food service sales, according to the Census Bureau’s preliminary estimates.
A 17.5% share is significant because it is the highest ever except for one month – the lockdown month of April 2020, when nonstore retail accounted for 18.8% of total retail and food service sales. May’s share was even slightly higher than May 2020, which was a month during which many Americans were still hunkered down at home, at least for much of the month.
Although not all that surprising, it is nevertheless remarkable that as recently as January 2020, nonstore retail accounted for only 12.3% of total sales. As of the start of 2019, nonstore retail was the fifth largest retail category in dollar-denominated sales. By the end of lockdowns, it ranked second and has steadily gained on motor vehicles and parts dealers. Given the trends, it’s not unthinkable that nonstore retail could exceed vehicle and parts dealers in the next year or two.
More complicated than home delivery
As we look more closely at the phenomenon of steadily rising nonstore retail sales, a natural companion discussion is the level of employment in the sector that the government rather archaically calls “couriers and messengers” – or what we would call parcel and local delivery. By the time the pandemic hit, employment already had been rising strongly since around 2013 as the e-commerce phenomenon took off.
The early pandemic period supercharged job growth in the sector, of course, but by early 2022, growth stalled and even declined year over year for a while from late 2022 through early 2024.
Why didn’t parcel and local delivery employment continue to rise in concert with nonstore retail? A major reason is that the Census Bureau data on retail sales is not adjusted for inflation, so some of the rising level of sales during this period was due to pricing, not unit volume.
However, inflation is not the only reason. While we tend to think of nonstore retail broadly as delivery of goods to homes or workplaces rather than purchased at brick-and-mortar stores, the truth is more complicated. For example, goods purchased online but picked up curbside or even in-store apparently are treated in the data as nonstore retail, at least in many cases. From a distribution perspective, that’s really the same as a physical store transaction; the difference is just how the sale was executed.
Another less obvious factor is the fact that not all goods purchases have to be delivered to the buyer – at least not in a physical sense. We have noted frequently that the most consistent growth sector for durable goods in recent years has been a category called “recreational goods and vehicles” and that within that category, the principal driver is computer-related goods, or, more formally, “information processing equipment.”
Drilling down even further, one of the big movers for information processing equipment is computer software – a commodity that these days almost always is simply downloaded through the Internet. Indeed, anything purchased online and downloaded – music, movies, etc. – would be considered nonstore retail.
Of course, Americans continue to buy actual physical goods online and have them delivered, so the growth of nonstore retail undoubtedly means more home and business delivery. However, it is useful to understand that not everything purchased online involves a driver in a cargo van.
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