Retail sales dropped in May, marking a shift in consumer spending from big-ticket items to goods and services related to going out amid business reopenings and higher vaccination rates. Consumers cut spending by 1.3% last month, trimming expenditures on autos, furniture, electronics, building materials and other items, the Commerce Department reported Tuesday. People spent more on such items throughout the Covid-19 pandemic but are now pulling back. Supply-chain disruptions and higher prices are also crimping sales of long-lasting goods.

Americans instead are spending more on services, which account for the bulk of economic output but are largely excluded from the retail-sales report. Spending on one service—restaurants and bars—rose 1.8% last month, sending food-service sales beyond pre-pandemic levels.

“The great pivot from goods into services has gained traction,” said Diane Swonk, chief economist at Grant Thornton. “As we shift into seeing and being seen, that whole process means spending on things that we didn’t spend on during the pandemic.”

Credit- and debit-card spending on many leisure services rose in May from April, according to data tracked by Earnest Research. In the four weeks ending June 2, spending at casinos rose nearly 17% from the four weeks prior, while consumers spent 9% more at theme parks and indoor-entertainment centers including bowling alleys, according to Earnest Research. Spending at gyms was up almost 4% over the same period.

Americans spent more on clothing and health and beauty products in May, categories of goods they had shunned for much of the pandemic but are likely turning to as they go out again. Online sales also dropped, signaling a pivot to more in-person shopping, Tuesday’s Commerce report showed.

The shift in retail habits came as government stimulus to households faded from earlier in the year and consumers encountered supply shortages and higher prices for products such as cars, lingering effects from the pandemic’s impact on the U.S. economy.

The Labor Department on Tuesday separately said its producer-price index rose 0.8% in May from the prior month. The index represents a measure of prices that suppliers are charging businesses and other customers. Recent increases in PPI may indicate that businesses are passing on the higher production costs to customers, some of which are translating to higher retail price tags on store shelves across the country.

Retail spending in May was up about 28% when compared with the same month a year ago, when widespread restrictions were in place aimed at containing the coronavirus.

Posted in: USA