Did Stimulus Checks Play A Big Part In May’s Retail Sales?

Today’s big economic story is how retail sales “surged” in May, since I’m rather loathe to repeat myself I’m not going to dig into the usual around inflation, the use of nominal figures, how beating bad numbers is not a reason to celebrate, etc, etc. After all, what good are the year-over-year retail sales figures until they factor out inflation especially that for food and energy, which can have a significant YoY impact on prices? I.e. shouldn’t the YoY figures indicate that people are spending more money and receiving more goods, not spending more money to receive the same amount (or fewer) goods than last year?

Okay, I did sort of just repeat myself but you get what I mean.

Instead, let’s look at the issue around the stimulus checks and how people are probably spending them, since stimulus checks are being touted as the reason for May’s “strong” retail sales number. As noted in today’s WSJ article on retail spending, it takes a nominal YoY spending increase of $3.85 billion to push retail sales up a percentage point, a number that’s roughly 8.02% of the $48 billion in stimulus checks issued during the month of May.

In other words, even if 100% of the checks issued were cashed/deposited/available to spend during the month of May and 100% of the YoY retail spending increase came from stimulus checks, consumers used 92% of the economic stimulus for savings, debt and other non-retail spending purposes.

The thing to keep in mind is that the above is a “maximum impact scenario” of sorts due to using an assumption that 100% of the YoY increase in sales came from stimulus checks, and that 100% of the checks were even available to spend.

Without knowing how many checks were cashed and/or available to spend, how people spent them, and what % of the YoY increase in retail sales came from the stimulus checks, it’s a bit of stretch to make any claims as to their impact. After all, even without stimulus checks it’s likely that some months will show higher than expected retail sales due to the impact of inflation, people making previously deferred purchases, seasonal impact, etc.