US retail sales in record rebound

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American shoppers returned in force in May, fuelling a record 17.7% monthly gain in retail spending after lockdowns triggered devastating declines in the previous months.

The rebound only partially made up for the losses, leaving spending down about 6% year-on-year.

And some sectors, such as clothing stores, have seen far steeper declines.

Still, the increase added to hopes that the economic recovery will be faster than predicted.

Last month, US employers also added a surprise 2.5 million jobs and the unemployment rate fell to 13.3%.

Capital Economics said it now expects the US economy to contract at an annual rate of 30% in the three months to July, compared to its previous more than 40% estimate.

But, senior economist Andrew Hunter warned: «There is still considerable uncertainty over whether spending will continue to recover at this pace over the coming months, particularly given the more recent upturn in new coronavirus cases in a number of states.»

US share prices headed higher on the news, rising more than 2% in opening trade.

Online companies benefited the most from the spending, with sales up more than 30% on the year. Building material and garden stores gained 16.4%.

Sales at clothing stores, however, remained more than 60% lower, while spending at restaurants and bars was nearly 40% down.

Speaking to Congress on Tuesday, Federal Reserve Chair Jerome Powell acknowledged the signs of improvement but warned that «significant uncertainty remains about the timing and strength of the recovery».

«Much of that economic uncertainty comes from uncertainty about the path of the disease and the effect of measures to contain it,» he said. «Until the public is confident that the disease is contained a full recovery is unlikely.»