US shoppers are spending more outside the grocery store, but there's still a long road to recovery in the retail sector

By Áine Cain

Shoppers in the United States are finally beginning to move beyond the grocery store, after months of eschewing non-essential retail purchases. 

On June 22, Moody's Analytics came out with a report indicating a recent thaw in discretionary retail spending. Moody's Analytics head of economic research Scott Hoyt wrote that total retail sales defied expectations in May, spiking 17.7%. In April, sales had dropped 14.7%. A subsidiary of Moody's Corporation, Moody's Analytics is an economic research firm completely separate from Moody's Investors Service. 

Much of the May gains came from discretionary spending, according to the Moody's Analytics report. The vehicle and restaurant categories proved to be "the largest dollar contributions to growth in May." Vehicle dealer sales alone contributed 40% to added sales in May. 

However, the spike in sales also reveals the depths to which spending tumbled earlier this spring.

"These numbers were so large because sales had fallen to such low levels," Hoyt wrote in the report.

Read more: TJ Maxx, Walmart, Target, and other big-box and deep-discount retailers will likely boom, experts say, thanks to a focus on value, safety, and efficiency

Essential retailers contributed relatively little to the May boost in sales. Moody's Analytics found that general merchandise and grocery stores — despite making up 20% of retail sales — only boosted overall sales by 2.5% last month. In comparison, while sporting goods and hobby stores only make up around 1.3% of overall retail sales, such retailers contributed 4.5% in sales gains for May.

The pandemic saw consumers stocking up on essentials and nixing dining-out habits in March and April. So while total retail sales have shot up since April, the numbers are still down from pre-COVID-19 spending. For example, even though apparel sales saw a 188% growth rate in May, clothing spending "remained barely more than a third of their February level," according to Hoyt.

Foot traffic tracking firm Placer.ai found that diners are slowly filtering back into chain sit-down restaurants, including Chili's, TGI Fridays, Perkins, and Olive Garden. But Moody's Analytics found that restaurant sales are still down by around 40% from pre-pandemic times, while gasoline stations, furniture outlets, and appliance stores have also yet to fully recover.

"The recovery in spending, especially for discretionary goods, is underway, but still has a long way to go," Hoyt wrote.