Consumers back to spend in stores

June sales up 7.5% but sustainability is in question

The American consumer came back last month, with retail sales increasing 7.5 percent from May as stores reopened in warm weather, shoppers shook off lockdown fatigue and the federal government pumped trillions of dollars of stimulus into the economy.

The jump, which sent spending back to just below where it was in February before the coronavirus pandemic sent the country into a tailspin, seemed to be cause for celebration after a record rebound in May.

“I feel like the consumers are just fed up,” said Andrew Moquin, who reopened his jewelry store outside Buffalo, New York, early last month. “They are moving on with their lives and they are saying, ‘I can’t solve these problems,’ whether it be COVID-19 or the divisiveness in the political arena. They want to be happy or they want their loved ones to be happy. You can only contract for so long before something expands.”

But the looming question is whether the robust recovery is sustainable. And 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 1 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.

The retail sales report released by the Commerce Department on Thursday ref lected 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.

Cellphone mobility data analyzed by the Federal Reserve Bank of Dallas tells a similar story, showing activity leveling off in

July and falling outright in states such as Arizona, Florida and Texas, where virus cases have been rising. An analysis of the same underlying data by the American Enterprise Institute found a particularly steep drop in visits to retail stores and other businesses.

“Looking ahead to July or August it starts to become more challenging to repeat the gains we have been seeing,” said Michelle Meyer, head of U.S. economics at Bank of America.

Malls and retailers that were deemed nonessential during lockdowns reopened in June and are now facing the prospect of closing again. Apple, one of the most prominent retailers, said it closed about 100 U.S. stores for a second time in recent weeks. Walmart, the nation’s biggest retailer, joined chains like Best Buy and Starbucks this week in mandating face masks inside all their stores, underscoring the health risks that retailers are struggling to navigate.

Still, Americans spent more last month than they did in June 2019, even as unemployment reached levels not seen since the Great Depression, cities were roiled by civil unrest and the threat of the virus loomed across the country. But the pandemic has altered which businesses are receiving that money, and the monthly sales report doesn’t fully reflect the huge shifts in how and where Americans have been shopping since the pandemic took hold.

The divide has grown between retailers considered “essential” and those deemed “nonessential,” and temporary closures delivered a severe blow to many large apparel chains, department stores and malls. High-profile bankruptcies since the beginning of May have included J.crew, J.C. Penney, Brooks Brothers and GNC, and many retailers like Macy’s and Levi’s have cut corporate jobs in addition to furloughing or laying off store workers. Shifts to online shopping and pickuponly operations led to job reductions at retailers and restaurants.

“It’s a completely unevenly distributed set of numbers,” said Sucharita Kodali, a retail analyst at Forrester Research. “The good news is that this does indicate there’s an appetite for spending, but it’s people who are continuing to spend a lot on things like toilet paper and hand sanitizer rather than the discretionary items they were buying before.”