May was a respectable month for US retail, with total sales increasing by 2.9 per cent over the prior year.

Inflation continues to play a role in driving growth, and once this is removed underlying volumes rose by a more modest 1.3 per cent. That said, there is no indication of a major consumer slump or a dramatic retrenchment in expenditure. Indeed, most households continue to spend at a steady pace, at least on an aggregate basis. 

On a broad category level, foodservice continues to lead the way with 5 per cent growth in spending compared to the same period last year. Almost all of this is driven by inflation with underlying volumes rising by just 0.2 per cent; in some areas like quick-service dining, volumes remain in negative territory. Because of a cocktail of cost increases facing operators, foodservice remains one of the main holdouts of hefty inflation. 

For core retail – which excludes foodservice, autos and gas sales – spending rose by 2.9 per cent or by 1.7 per cent in volume terms. While growth is slower than April, the numbers remain solid – especially as the month was up against a tougher comparative from the prior year. Indeed, on a two-year basis, May’s growth of 6.8 per cent is faster than April’s 4.2 per cent. Some of this is down to a shift in the timing of Easter which diminished April sales, but some is also a result of a small rally in spending around the Memorial Day holiday in May. 

Although core retail is holding up well, under the headline number there is still a lot of choppiness in terms of retail sectors. This month, apparel stores led the way with a 4 per cent increase in sales; a 2.9 per cent increase in volume terms. The arrival of summer weather and some good deals and discounts around Memorial Day helped to stimulate spending. Womenswear continues to outperform while menswear is a bit more sluggish, and footwear remains in the doldrums. What’s clear in apparel is that the shopper is looking for bargains and value when they spend. 

Most of the home-related sectors remain in negative territory. Sales at furniture and homewares stores shrank by 5.9 per cent – a figure that was worse than last month. Meanwhile, at home improvement stores sales declined by 4 per cent – a disappointing outcome given the better weather conditions for outdoor and gardening projects. Neither category is helped by continued sluggishness in the housing market which is depressing demand from a relative lack of movers. Among those not moving, there is nervousness about buying big-ticket items which means upgrade cycles for furniture and decor are more elongated than normal.

Over at grocers, sales rose by 2.8 per cent. As inflation continues to moderate in the food category volumes are now positive, growing by around 1.4 per cent in May. With grocers becoming more aggressive with discounts and promotions, consumers are putting more in their baskets – especially when there is an excuse for spending, such as around the Memorial Day weekend. The moderation of inflation is good news for consumers, but the more competitive trading environment is not so good for retail margins, and we expect food retailers to experience some profit squeeze across the balance of this year.

Department stores, which usually languish at the bottom of the league table, saw modest growth of 0.7 per cent in May. Most of this came from a better performance of apparel but, given the very discretionary nature of department store visits and buying, this is nonetheless a very positive signal of consumer resilience. Whether department stores can maintain this momentum remains to be seen; but we note many companies in the space are now making a concerted effort to improve the customer experience to help trading.

Looking ahead, it is reasonable to expect the consumer will remain steady and spending growth will continue on a gentle upward trajectory. However, the subtle changes in buying behaviors – more caution, more shopping around, more concern for value, more bargain seeking – should not be overlooked.

This is not a terrible retail economy, but it is one in which the consumer remains skittish. 

April retail sales data mixes good news and bad

• Neil Saunders is MD at GlobalData Retail.