US retail sales regain pre-pandemic level
Slowdown predicted as laid-off workers lose extra $600
WASHINGTON — Americans increased their retail purchases by 1.2% in July, with solid gains in appliances and clothing helping restore sales to their level before the viral pandemic erupted in March.
Sales at retail stores and restaurants have now risen for three straight months, after plunges in March and April, when the pandemic shuttered businesses and paralyzed the economy. Still, much of the spending was fueled by government aid that had put more money in people’s pockets but has since expired. With Americans’ income now likely shrinking, economists expect a drop in spending and a potential weakening of growth.
Friday’s report showed sharp increases in sales at electronics and appliances stores, reflecting the needs of mostly higherincome people who are now working from home. Furniture sales were flat after a huge gain in June.
The problem now is that roughly 28 million laid-off workers are no longer receiving a $600-a-week federal unemployment check that they had received in addition to their state benefit but that lapsed last month. In addition, a $1,200 stimulus check that was sent to many Americans in April and May likely won’t be repeated. Negotiations in Congress on a new economic relief package have collapsed in rancor and show no sign of restarting anytime soon.
Many retailers have said the supplemental unemployment aid had helped spur sales of clothes and other non-discretionary items in the spring and early summer.
“Uncertainty surrounding job and income prospects could weigh on consumer confidence and spending going forward, especially now that enhanced unemployment insurance measures which provided critical support to households have expired,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
Spending on credit and debit cards has been essentially flat since mid-June, according to an index from JPMorgan Chase that tracks spending on 30 million of its card accounts, after a steady rise that began in mid-April when stimulus checks were first mailed.
Retail sales include only about one-third of all consumer spending. The rest involves services — from haircuts and gym memberships to movie tickets and hotel rooms — all of which were hit disproportionately hard by the pandemic and have yet to recover.