Declining inflation keeps lid on May grocery sales growth

Sales at grocery stores remained flattish in May as lower inflation reined in overall U.S. retail sales growth.

May retail and foodservice sales inched up 0.3% to $686.57 billion (seasonally adjusted) from $684.21 billion in revised figures for April and rose 1.6% from updated numbers for May 2022, the U.S. Census Bureau reported in advance estimates on Thursday.

Retail trade sales for May—excluding motor vehicles, parts stores, gas stations and repair shops—edged up 0.3% month to month to $598.58 billion and grew 0.7% year over year.

The May results compared with April increases of 0.4% monthly and 1.2% annually for total retail and foodservice sales and 0.4% sequentially and 0.2% year over year for retail trade sales.

Grocery store sales came in virtually flat in May, up 0.2% to $73.79 billion (seasonally adjusted) from $73.63 billion in revised figures for April, when sales dipped 0.1% sequentially, the Census Bureau said. Over the 12-month period, May grocery retail sales climbed 3.1%, down from a yearly gain of 4.1% in April.

At all food and beverage stores, sales for May increased 0.3% monthly to $81.1 billion and were up 3.1% over 12 months. That compared with a 0.1% dip sequentially and a 3.9% uptick annually in April’s revised data, the Census Bureau reported.

“This month’s 0.3% gain in retail sales reflects inflation trends as much as it reflects consumer spending,” Claire Tassin, retail and e-commerce analyst at data intelligence firm Morning Consult, said in an email. “In Morning Consult surveys, fewer consumers are articulating strong concerns about inflation: 54% of U.S. adults said they’re ‘very concerned’ about inflation in early June, down from 64% in July 2022, when inflation was peaking.”

Indeed, the May Consumer Price Index (CPI) rose 4% (unadjusted) over the previous 12 months, down from a 4.9% uptick in April, the U.S. Bureau of Labor Statistics (BLS) reported Tuesday. That marked the 11th straight month of annual decreases. On a monthly basis, the May CPI was up 0.1% (seasonally adjusted) versus a 0.4% rise in April.

The trend was similar with food price inflation. Month to month, the food-at-home CPI inched up 0.1% in May after decreases of 0.2% in April and 0.3% in March. On a yearly basis, the food-at-home index was up 5.8% in May, continuing declines from 7.1% in April and 8.4% in March.

“The retail sales report reflects consumer spending resilience despite economic uncertainty. Spending grew across every category besides gasoline stations and miscellaneous stores,” according to Naveen Jaggi, president of retail advisory services at commercial real estate firm Jones Lang LaSalle (JLL).

“Retail foot traffic saw mostly positive results in May and continues to stay consistent this year,” Jaggi explained, referring to data trends from foot-traffic analytics firm Placer.ai. “Some categories like theater, attractions, pet stores and sporting goods saw month-over-month declines, but many categories saw traffic grow, such as home improvement, discount and dollar stores, fitness, gas stations, department stores and grocery. This shows that many consumers are still engaging with physical stores and showing solid demand as they faced high interest rates.”

On Thursday, the National Retail Federation (NRF) reported a 0.4% monthly uptick (seasonally adjusted) and a 4.4% annual gain (unadjusted) for May retail sales, compared with increases of 0.6% monthly and a 1.4% over 12 months in revised numbers for April.

The National Retail Federation reported a 0.3% monthly increase and a 3.7% annual gain for grocery and beverage stores in May. / Photo by Russell Redman

NRF’s estimate focuses on core retail, excluding automobile dealers, gas stations and restaurants. The retail trade group said its sales figures rose 3.7% unadjusted annually on a three-month moving average through May.

“This was a positive report, with no sign of an abruptly slowing economy despite what has happened with inflation and interest rate pressures. Even though shoppers dialed back in some categories on a year-over-year basis, these numbers confirm that consumers still have the capacity to spend,” NRF Chief Economist Jack Kleinhenz said in a statement. “Job growth and wages are providing buoyancy, although inflation continues to take a bite out of consumer income. May is typically a strong month for retail as spring shopping hits its peak, but above-average temperatures and below-average precipitation no doubt played a favorable role.”

May sales grew on a monthly basis in seven of nine retail categories tracked by NRF: grocery and beverage stores, general merchandise stores, online stores, sporting goods stores, building materials and garden supply stores, furniture and home furnishings stores, and electronics and appliance stores. The remaining two categories—health and personal care stores (including drug stores) and apparel and accessories stores—posted flat sequential sales for May.

Three retail segments tallied 12-month sales decreases in May, including apparel and accessories stores, electronics and appliance stores, and furniture and home furnishings stores, according to NRF.

Grocery and beverage stores sales were up 0.3% month to month seasonally adjusted in April and rose 3.7% unadjusted over 12 months, NRF reported. Among other retail categories in the food, drug and mass channel, May sales were unchanged month over month seasonally adjusted and gained 9.7% unadjusted year over year for health and personal care stores (including drugstores), while general merchandise stores saw sales edge up 0.4% month over month seasonally adjusted and 1.7% unadjusted year over year.

“Consumers continued to spend on household priorities in May, supported by gains in the job market and wages,” NRF President and CEO Matthew Shay observed on the May retail sales performance. “Retailers recognize the ongoing pressure on cost-sensitive consumers and are offering competitive pricing, a wide product mix and convenient shopping options to help stretch family budgets.”