Retail Sales Rebound in May

The U.S. Commerce Department reported Tuesday that retail and food-services sales rebounded 17.7% in May to $485.5 billion, exceeding expectations for an 8.4% advance. Last month's increase followed a 14.7% decrease in April, which was upwardly revised slightly from the 16.4% decline previously indicated.

On the release, the department stated, "Due to recent events surrounding Covid-19, many businesses are operating on a limited capacity or have ceased operations completely. The Census Bureau has monitored response and data quality and determined estimates in this release meet publication standards."

On a monthly basis, excluding auto sales (which because of their high ticket price can result in volatile monthly readings), retail sales were up 12.4%, outpacing expectations for a 5.5% monthly gain. Excluding autos and gas, sales were up 12.4% in May, also beating expectations for a 5.1% advance.

Core retail sales (i.e., retail sales excluding receipts from auto dealers, building materials retailers, gas stations, office supply stores, mobile homes and tobacco stores) were up 11.0% in May, again outpacing expectations for a 5.2% advance. While this group is not considered to have as big an impact on trading as the headline number unless there is significant deviation from expectations, we note the results because it is also what is known as the "control" group and is closely associated with personal consumption expenditure (PCE), which is a large portion of the gross domestic product (GDP).

Digging deeper, the report also shows:

• Miscellaneous store retailers sales: 13.6% MoM (month over month) and -22.8% YoY (year over year)
• Non-store retailers (i.e., e-commerce) sales: +9.0% MoM and +30.8% YoY
• Sporting goods, hobby, musical instrument & book stores sales: +88.2% MoM and +4.9% YoY
• Food & beverage stores sales: +2.0% MoM and +14.5% YoY
• General-merchandise stores sales: +6.0% MoM and 0.0% YoY
• Health & personal care stores sales: +0.4% MoM and -10.3% YoY
• Department Stores sales: +36.9% MoM and -25.8% YoY
• Furniture & home furniture stores sales: +89.7% MoM and -21.5% YoY
• Food services & drinking places sales: +29.1% MoM and -39.4% YoY
• Motor vehicle & parts dealers sales: +44.1% MoM and -3.9% YoY
• Clothing and clothing accessory stores sales:188.0% MoM and -63.4% YoY
• Building material & garden equipment & supplies dealers sales: +10.9% MoM and +16.4% YoY
• Electronics & appliance stores sales: +50.5% MoM and -29.9% YoY
• Gas stations sales: +12.8% MoM and -30.8% YoY

All in all, this was certainly a welcome report that serves to support the view that the worst of the economic impact resulting from the coronavirus pandemic is likely behind us. That said, while the market is surging this morning, in part as a result of the strong numbers, we are not ready to call the all-clear as where we go from here will be heavily dependent on our ability to continue social distancing efforts and prevent a resurgence of infections. Additionally, the question still remains as to how many jobs will return as businesses reopen, a question that speaks directly to mid-to-longer-term unemployment expectations.

Members interested in digging even deeper can view the report's official release here. As members go through the data, we encourage you to consider both the short-term (MoM) and longer-term (YoY) dynamics at play in the industries in which you are invested. For example, we are especially encouraged by the monthly surge in sales at Clothing & clothing accessories stores, which speaks to our position in TJX Companies (TJX) . The annual number for non-store retailers is also encouraging as we believe the significant move to e-commerce represent an accelerated and permanent shift in consumer behavior. We're also encouraged, from a higher level, by the numbers at Furniture & home furniture stores, Electronics & appliance stores and Sporting goods, hobby, musical instrument, and book stores, as all of these numbers speak to a consumer that is getting out of the house and doing some discretionary buying - a key factor in getting our consumer-oriented economy back on track.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long TJX.