May's blockbuster retail sales report overshadowed shifting consumer trends that could widen inequality in the US

Steven Saphore/Reuters
  • US retail sales surged a record 17.7% in May, double economist estimates, following two consecutive months of record slumps.
  • But, there are also signs of shifting consumer trends in the US that could widen the inequality gap.
  • “Consumer spending is always skewed toward higher income groups,” wrote Samuel Coffin of UBS in a Tuesday note. “It is even more skewed in this crisis.”
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Even though US retail sales surged in May, sparking hopes that a swift recovery is underway, there are signs that the pandemic is shifting consumer spending in a way that could exacerbate inequality in the US.

US retail sales surged a record 17.7% in May, double economist estimates, following two consecutive months of record slumps. The jump came as some states slowly began to reopen restaurants and stores in May, and consumer spending was fuelled by federal stimulus checks and tax refunds.

But while welcome, the jump may be mostly driven by spending in higher income groups that are feeling better about the coronavirus pandemic, and may not indicate that all consumers are returning to pre-pandemic shopping.

“Consumer spending is always skewed toward higher income groups,” wrote Samuel Coffin of UBS in a Tuesday note. “It is even more skewed in this crisis.”

He also said that mobility restrictions put in place to curb the spread of disease have had drastic effects on the jobs and incomes of lower-paid workers.

A June report from the JPMorgan Chase Institute that analysed about 450 million monthly credit card transactions made by a rolling sample of 11 million customer accounts saw a similar trend. It found that the coronavirus pandemic has increased non-local retail spending, mostly online.


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The shift to online shopping is a decades-long trend that’s been accelerated by the coronavirus pandemic, according to the report. And while online shopping has benefits for consumers, as it widens the range of goods and services available, it could stir inequality.

Online shopping is “most likely to benefit those with higher-incomes, and local retail remains a lifeline for lower-income consumers,” Marvin Ward Jr., the institute’s local commerce research lead, told Bloomberg in an interview.

Diane Swonk, chief economist at Grant Thornton, said it’s too early to celebrate the May retail numbers in a Tuesday blog post.

“Stimulus checks, along with enhanced unemployment benefits, helped many to weather the shutdowns, but food lines lengthened as only about half of renters were confident they could pay rent in May,” she wrote.

Swonk also pointed out that high-end customers were likely more confident in May as their stock portfolios rallied, and may be feeling a “false sense of security” in their jobs.

“The second shoe to drop on layoffs will be higher paid white-collar jobs,” said Swonk. “Firms that expected COVID-19 to be temporary are now realising a more lasting effect on the pipeline for business.”

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