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Retail sales plunge record 16.4% in April amid COVID-19

Yahoo Finance’s Heidi Chung joins Zack Guzman to break down April’s record retail sales.

Video Transcript

ZACK GUZMAN: And we look at the retail numbers, retail and restaurant sales fell 16.4% for the month prior. That was worse than the median expectation for a 12% decline and almost double the number we got back in March, which was previously the worst number we've got since 1992. But for more on the report, I want to get to Yahoo Finance's Heidi Chung who has more on what to make of the latest print. Heidi.

HEIDI CHUNG: Good afternoon, Zack. Yeah, the US economy continues to break records but not necessarily in a positive way here. US consumer activity taking another big blow in April, as quarantine measures keep US citizens at home unable to spend that money that they do have in their pockets right now. Data from the US Commerce Department this morning showing that headline retail sales, like you mentioned, plunged a record 16.4% in April.

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Economists were projecting about a 12% drop during the month. Core retail sales, though, which excludes the volatile auto and gas components, like 16.2% during April, which was much worse than a 7.6% decline that was estimated by economists. Now, this compares to a retail sales drop of 84% and core retail sales decline of 2.8% in March.

Looking at the different categories here of consumer activity, clothing sales saw the biggest decline of 78.8% during the month followed by sales at electronics stores tumbling to 60.6%. Furniture store sales falling at 58.7%. Sporting goods stores plunging 38%. Spending at restaurants and bars plummeting 29.5%. Department stores saw sales dip between 0.09%. Auto and auto parts sales decreased 12.4%, and gas spending falling 28.8%.

But after seeing an increase in spending in March, sales at grocery stores sank 13.2% in April. The one bright spot in the report, Zack, though, online sales increasing 8.4%, April. We're already starting to see several firms-- several economists here revise their Q2 GDP outlook just given the huge drop that we did see here in consumer activity.

As we know, the consumer accounts about 70% of GDP. So it's a very meaningful portion of that. But on the bright side, a lot of economists also coming out and saying that maybe April low point here at the bottom. And we might see some gradual improvement come May and June.

ZACK GUZMAN: Yeah, even if that is the bottom, we still have a lot of earnings announcements to come next week from retailers out there. And you look at this print and wonder, all right, how bad could it be when they actually report next week? And I assume optimism is not very high running into those reports.

HEIDI CHUNG: Yeah, consumer discretionary expected to see a big decline in earnings. We have a lot of different categories here. We have auto parts, like Advanced Auto Parts reporting Tuesday. And home improvement companies, like Home Depot and Lowe's, also gearing up to report earnings here. And also some specialty retailers such as Urban Outfitters. And, of course, big box retailer, like Walmart, Target.

A lot of folks out there saying that next week will be very indicative of how retail has sort of fared during this pandemic. A lot of people saying, we will see some clear winners and losers. And maybe in that winners category, you will see those big boxes retailers that have really ramped up their digital initiatives.

They have order click and collect. You can pick up curbside. A lot of different ways to make sure that you're socially distancing and really abiding by those different mandates that we have seen. So next week is going to be very crucial, Zack. We'll be keeping a close eye on those retailers,

ZACK GUZMAN: Yeah, and I mean, it's just a piece of the economy, but it's an important piece. And as we look at the other data we got today, trying to make sense of, sure, it's a bad number. But what direction are we moving? You can look at the Empire State survey for May rising from April's record low to negative 48.5 off of April 78.2 reading. So that was above consensus.

So maybe optimism on that front. But then you also look at the consumer sentiment survey out on the University of Michigan. That came in at 73.7 for May also up from April and above estimates on that front. It's a question of how much that might be tied to the fiscal stimulus measures, stimulus checks, and optimism on that front.

But, I mean, it's a kind of confusing time to digest all this data, as you get a terrible print in retail, record bad print when we think about industrial production. So what's your take on blending all of those things together to try and figure out if the worst is behind us?

HEIDI CHUNG: Well, Zack, a lot of the data that we are getting again is very backwards-looking. So sentiment is something that a lot of folks look to as sort of an indicator where as how people feel going into the future. And, of course, consumer, again, being such a big part of the economy, it does matter when we see that unexpected bounce in consumer confidence in May-- a reading of 73.7, up from 71.8 in April.

Now, overall, I think we should look at this as a rather encouraging indicator of how people are sort of doing, reopening of economies, those stimulus checks like you mentioned. A lot of this has to do with, do I feel good about spending money? Does the future seem like it's going to open up? Will things get better? For now that is what it appears like, at least, when we take a look at this consumer confidence reading, Zack.

ZACK GUZMAN: All right, Heidi Chung bringing us the latest on the economic data front, as, again, we try and purse through it all-- appreciate you bringing that to us--