Boosted by low-interest rates, store reopenings and stimulus checks, retail and food services sales rebounded once again in June, according to U.S. Census Bureau data. They were up 7.5% overall -- from $487.7 billion in May to $524.3 billion in June -- but there’s a big “but,” in the views of many analysts.
“Economists attributed the second straight monthly increase in retail sales … to the government’s additional weekly $600 checks for the unemployed, a benefit that is set to end on July 31. The expiration of the program will leave millions of gig workers and the self employed among others, who do not qualify for regular state unemployment insurance, without an income,” Reuters’ Lucia Mutikani writes.
“Economists warned this would undercut consumer spending and the overall economy at a time when new cases of the coronavirus are sky-rocketing, especially in the densely populated South and West, and forcing some authorities in these regions to either close businesses again or pause reopenings,” Mutikani continues.
“There are already ominous signs throughout the broader economy that the rebound may fizzle, as stimulus money, unemployment benefits and tax refunds fade away and the virus continues to spread. On Thursday, new claims for state unemployment benefits exceeded one million for the 17th consecutive week and while the overall claims remained relatively flat, they rose in California, Florida and Georgia, where infections are climbing,” Sapna Maheshwari, Michael Corkery and Nelson D. Schwartz write for The New York Times.
“The retail sales report released by the Commerce Department on Thursday reflected spending in June, before the surge in virus cases forced some businesses to close down again and worried consumers anew. More up-to-date credit card data compiled by a team of researchers at Harvard University and Brown University shows that consumer spending rebounded relatively steadily from mid-April to late June, but has been roughly flat since then,” they add.
“While spending was good in the first few weeks of June, it’s equally clear now that things have faded," Ian Shepherdson, chief economist at Pantheon Macroeconomics tells The Wall Street Journal’s Harriet Torry. “It’s going to take a long time to wring this out of the system to the point that we can re-reopen the economy properly,” he said.
“A 2.4% dip in sales at nonstore retailers, a category that includes online merchants such as Amazon.com, in June suggests ‘consumers took advantage of stay-at-home orders being lifted and went out and about and shopped at stores,’ said Richard Moody, chief economist at Regions Financial Corp. Looking to the months ahead, ‘it may be a flatter trajectory upwards’ for retail sales with virus cases on the rise,’ he said,” Torry adds.
And Oxford Economics’ chief U.S. economist Greg Daco yesterday “noted that the firm’s real-time activity tracker has flattened out in recent weeks, calling this a sign that we’re witnessing a ‘premature plateauing of the recovery,’” Myles Udland writes for Yahoo Finance.
“While it would be premature to call for a double-dip recession, this recovery is clearly at risk from a mishandled health situation. Policymakers across the country have an active role to play in containing the virus and ensuring the nation avoids looming fiscal cliffs from the expiry of unemployment benefits, PPP funds running low, and state and local budgets being cut to the bone,” Daco said, Udland reports.
Indeed, “foot traffic to North American retail stores decreased by 43% during the week ending Wednesday, according to data from Bernstein,” Nathaniel Meyersohn writes for CNN Business.
“‘The pace of recovery has slowed in recent weeks,’ Bernstein analysts said in a research note Wednesday. ‘As cases spike in some states and local governments roll back reopening plans, we will watch to see if traffic begins to reverse course in the coming weeks.’”
Meanwhile, “the $47 billion in June sales at restaurants represented a nearly 60% improvement over April, but still lagged the $64 billion in sales seen in the previous June as restaurants were either closed altogether or were required to limit capacity in their dining rooms to help reduce the spread of coronavirus,” Karen Robinson-Jacobs reports for Forbes.
“The Census Bureau figures are advance estimates and can be expected to see revisions once the impact of the current surge in coronavirus cases is factored in,” she warns.