Commentary

Shoppers Returned To The Aisles, Curbs And Apps Last Month

Retail and food sales rebounded a record-setting 17.7% in May, helping to push up the Dow by 526 points for a third consecutive day of gains. That said, the retail gains come off a record-setting plunge of 16.4% in April

“The May numbers followed two months of record declines, and overall sales were still down 8% from February. Some categories, like clothing, were down as much as 63% from a year earlier. And many of the stores and restaurants that welcomed back customers last month did so with fewer employees, reflecting a permanently altered retail landscape and an ominous sign for the labor market,” write  Michael Corkery and Sapna Maheshwari for The New York Times.

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“I think a lot of it is lockdown fatigue,” Beth Ann Bovino, chief U.S. economist at S&P Global, tells them. “I would caution not to be fooled by this large gain. We still have a long way to go in repairing the economy.”

“The 17.7% headline gain including food sales easily topped the record 6.7% from October 2001 -- a month after the 9/11 terrorist attacks -- and beat the 8% estimate from economists surveyed by Dow Jones,” writes CNBC’s Jeff Cox.

“Retail sales alone powered 16.8% higher from a month earlier, more than double the estimate of 8% from Dow Jones and reversing from a revised 14.7% plunge from the previous month. Clothing and accessories stores reported the biggest percentage gain at 188% while sporting goods, hobby, musical instruments and book stores rose 88.2%,” Cox adds.

“To be sure, the rebound was widespread but was concentrated among the hardest-hit sectors including clothing, furniture, electronics and motor vehicles. Sales at restaurants and bars saw a 29% rebound. Economists caution that these industries are still recovering from very depressed levels,” Jessica Menton writes for USA Today.

“Even so, the retail figures, emerging after a surprise 2.5 million increase in U.S. jobs during the month, suggest a faster-than-anticipated rebound from what’s likely to prove the steepest downturn since the Great Depression. After months of being stuck at home because of the coronavirus, Americans began to travel and visit store fronts as states relaxed lockdowns,” write  Bloomberg’s Katia Dmitrieva and Olivia Rockeman.

“The fact that people left the house, went to stores, went to restaurants, they’re going out to eat, going out to grab a drink -- that to me shows that you can never underestimate the American consumer,” Jennifer Lee, senior economist at BMO Capital Markets, tells Dmitrieva and Rockeman.

Sure, pent-up demand is a powerful impetus. So, too, is cash in the pockets.

“The CARES Act, which authorized over $2 trillion in aid to support the economy, most of which has been, or will be, distributed over a period of just a few months from March to July, is a seriously under-heralded piece of legislation. (I am still irritated about all the “They think a $1,200 check is enough to live on for five months?” takes that were published in March),” writes  Josh Barro for New York’s “Intelligencer” column.

“Four-figure checks for most American adults -- plus $500 for most of their minor children -- were a key component of the CARES Act, but only accounted for about an eighth of the law’s cost,” Barro continues, citing enhanced basic unemployment benefits of $600 per week, extending unemployment benefits to workers like independent contractors, the PPP program that helped keep some workers on payrolls and some businesses out of bankruptcy, as well as lending programs that helped to ensure that businesses don’t go out of business for lack of access to credit.

Then there are those consumers whose income has not been affected whatsoever.

“Many consumers in the U.S. and Europe who have held on to their jobs or are getting government benefits have seen their bank accounts swell during lockdowns, according to government data, because of restrictions on shopping and big-spending activities such as tourism,”  Matthew Dalton and Suzanne Kapner report  for The Wall Street Journal.

“Consumers with means are driving surprising strength in a number of sectors. People are flocking to home-improvement stores and car dealerships. They want to install pools in their backyards and Jacuzzis in their bathrooms. Spending on furniture has jumped. So have sales of fitness and sports equipment.”

But U.S. Federal Reserve chairman Jerome Powell “doused some of the market’s optimism on Tuesday with a rather bleak picture of the U.S. economy, while also reinforcing hopes for continued policy support,” Reuters’ Saikat Chatterjee reports.

“Significant uncertainty remains about the timing and strength of the recovery,” Powell told the Senate Banking Committee.

Add record-high coronavirus infections in six U.S. states and new coronavirus cases in Beijing to that uncertainty. Still, President Trump retweeted his assertion that “without testing, or weak testing, we would be showing almost no cases” of coronavirus even as the confirmed death toll from COVID-19 in the U.S. pushes 120,000.

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