US consumers await Biden stimulus injection
WASHINGTON: President-elect Joe Biden’s stimulus plan could spur hesitant US consumers to start spending again, analysts said, amid reports of falling sales in December. But they warned the vast package may not be enough to overcome surging coronavirus cases.
Biden on Thursday unveiled a $1.9 trillion package aimed at getting the world’s largest economy back on its feet after business shutdowns to stop COVID-19 caused a massive downturn in 2020.
The package, dubbed the American Rescue Plan, would raise the minimum wage to $15 an hour, fund struggling state and local governments, send larger stimulus checks to consumers and pay for a renewed testing and vaccination assault on the coronavirus. Those provisions could help return shoppers to the struggling retail sector, where the Commerce Department said Friday sales fell 0.7 percent during the December holiday season as even booming ecommerce outlets did less business.
“President-elect Biden’s ambitious fiscal agenda could further juice up household spending during the delicate vaccine rollout phase. Thereafter, consumers’ mood should revive as herd immunity comes within reach and further fiscal aid is delivered,” Lydia Boussour of Oxford Economics said.
But with COVID-19 cases still at worrying levels across the economy, Ian Shepherdson of Pantheon Macroeconomics feared that even Biden’s massive proposal won’t be enough to lure people back to stores. “We expect consumers’ spending to struggle until falling COVID cases allow restrictions to be eased, starting in March. We think most of the next round of stimulus payments, proposed yesterday by President-elect Biden, will be saved,” Shepherdson said.
Worrying signs
The retail sales data follows recent Labor Department statistics showing weekly claims for new unemployment benefits increasing, and the economy shedding jobs in December. The president-elect’s proposal would cushion the blow for the unemployed by increasing the amount of weekly payments and lengthening their duration, while also raising stimulus payments included in a December measure to $2,000 from $600.
Congress is controlled only narrowly by Biden’s Democrats, but at least one key senator has expressed reservations about the plan’s increased stimulus checks, even as party leaders vowed to act swiftly on the proposal. “His plan makes big, bold, urgent action, building on some of our Democratic initiatives in the last Congress,” Speaker of the House Nancy Pelosi said on Friday.
The National Retail Federation industry group sounded a positive note, saying: “We support providing critical government assistance in the form of direct payments to families and individuals whose lives have been disrupted, further aid for small businesses across the country, and tools to keep businesses open and the economy growing.”