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Retail Sales Fell in May as Americans Shift to Spending on Services

Retail sales fell in May as more Americans shift to spending less money on goods, and more money on services and vacations. According to the U.S. Commerce Department’s latest report, May’s retail sales fell because of a variety of reasons, but mainly because of a decline in auto sales.

As more Americans are getting fully vaccinated in the United States, people are looking forward to traveling and going on vacation, some for the first time in a while. As a result, more people are spending money on taking these vacations. Plus, people are putting money into services that help them get ready for vacation, or to start going out again — services such as haircuts and more. 

According to the latest U.S. Commerce Department report, total sales have dropped 1.3% in May from April. This is a slightly larger drop than expected, as many Wall Street analysts thought the decline would only be about 0.5%.

However, this latest drop in sales might actually be a blessing in disguise for many in the industry. Auto sales dropped in May — which accounts for why the retail sales dropped as a whole in the United States — for a number of reasons. A record number of people bought cars last year during the pandemic, so there were fewer people this year who needed a new car.

Plus, car prices have risen because of the material shortages much of the nation is facing. There is currently a worldwide shortage of chips — parts needed to power car features. Because of this shortage, car prices rose. Naturally, fewer people ended up buying cars in May.

This fall in sales, however, could help the labor and raw material shortages even out as there is less consumer demand. In a way, the economy could naturally balance itself out again, as least as far as retail stores go. By the time consumer demand surges again, material and labor issues could finally be sorted out. 

Already, we’re seeing some of this take effect. According to another government report, automakers already ramped up production in May. In the previous three months, production had fallen. This could be a sign that material shortages may no longer plague certain automakers. 

We can also see some improvement in the home building industry. Previously this year, home builders faced struggles during construction because of the high lumber costs. Now, however, lumber prices have finally begun to decline again as sawmills lift production. 

Analysts predicted this drop in car sales, though, because of the shortage of chips. Auto sales at dealerships fell about 3.7% in May, according to this latest U.S. Commerce Department report.

Sales didn’t just fall in the auto industry, though. According to the report, sales also fell at electronics, home building, and furniture stores. Meanwhile, sales in restaurants and at clothing stores have both risen in May.

However, even with these retail sales drop, many retailers and stores are remaining positive. For example, Walmart has already updated their forecast for the year and believes their sales will rise to about 13.5% this year. Best Buy also expects to do well and believes their sales will rise.

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