MESSAGE
| DATE | 2020-08-14 |
| FROM | Ruben Safir
|
| SUBJECT | Subject: [Hangout - NYLXS] Confusing
|
Where is the money coming from?
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wsj.com
Retail Spending in July Topped Pre-Pandemic Levels
Josh Mitchell and Suzanne Kapner
8-10 minutes
Americans’ shopping surpassed pre-pandemic levels last month, but new
obstacles could hamstring the U.S. economy as it digs out of a severe
recession.
Retail sales—reflecting what households spent at service stations,
stores, restaurants and online—rose 1.2% in July, the Commerce
Department said Friday. That marked the third consecutive monthly gain
as the U.S. strived to reopen its economy as much as possible despite
the challenges posed by the coronavirus pandemic. After accounting for
seasonal factors, sales were 1.7% higher compared to February, the month
before the pandemic shut down much of the economy. Consumers last month
boosted spending on electronics and appliances, health products and
restaurant meals.
But more recent evidence suggests households likely moderated their
spending this month. One factor: the July 31 expiration of an enhanced
unemployment benefit. That benefit—authorized in the Cares Act passed by
Congress in March—had boosted jobless workers’ weekly income by $600 a
week, and many households spent it. Amid congressional deadlock over a
new stimulus plan, President Trump has acted to replace the payments
with a $300-a-week benefit, but it isn’t expected to reach workers for
weeks.
“There’s a lot of talk about the recovery as if they’ve declared the
recession dead already,” said Amy Crews Cutts, head of the consultancy
AC Cutts & Associates. “I think we are not clear from a recession, and
the stops and starts that are happening in the economic opening at the
state level are showing a fragility in the economy.”
Many economists expect the economy to rebound this quarter after gross
domestic product fell 9.5%, or 32.9% at an annual rate, in the second
quarter. Economists expect output to grow at an 18.3% annual rate in the
third quarter, according to a Wall Street Journal survey.
Other data suggest the economy is growing. Industrial production, a
measure of output at factories, mines and utilities, rose 3% in July
from June, the Federal Reserve said Friday, after a 5.7% rise in June.
Analysts and economists are paying close attention to monthly
retail-sales numbers as a way to gauge how the economy may be recovering
from the impact of the coronavirus pandemic. Photo: Kathy
Willens/Associated Press.
The economy has added millions of jobs in the past three months,
including 1.8 million in July. Initial jobless claims, a proxy for
layoffs, fell below 1 million last week for the first time since March.
Still, layoffs remain exceptionally high, employment is down by nearly
13 million from February, and the jobless rate stood at a historically
high 10.2% in July.
In the world’s largest economy, consumers are paramount. Their spending
reflects more than two-thirds of economic demand. Retail spending, which
excludes costs like utilities and rent, represents a big chunk of all
consumer spending.
A rise in coronavirus infections in several big states earlier this
summer prompted a new round of restrictions on businesses and spooked
many consumers back into their homes. The prospect of schools moving
teaching online this fall may also undermine back-to-school spending.
SHARE YOUR THOUGHTS
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conversation below.
“Many households are now being more cautious now that enhanced
unemployment benefits have dried up,” said Neil Saunders, a retail
analyst for the research firm GlobalData.
Only 36% of consumers tracked by GlobalData spent more or the same
amount on retail purchases during the first week of August as they did
the same week a year ago. That is down from 57% who did so during the
last week of June. Separate data show consumers cut credit-card spending
in stores in late July and early August, compared with year-earlier
levels, according to data from Earnest Research. Restaurant spending
also lost momentum in recent days, OpenTable data show.
Foot traffic to retail stores declined six weeks ago, coinciding with
the receipt of the last batch of stimulus checks, a separate part of the
pandemic relief unrelated to the added unemployment benefits, according
to Aneta Markowska, the chief financial economist at Jefferies Group
LLC. The firm parses data from location-tracking company SafeGraph Inc.,
and since then has found that foot traffic has remained fairly steady,
despite the end of the additional unemployment benefits.
Shoppers at the Valley Mall in Halfway, Md., earlier this week.
Photo: Colleen McGrath/Associated Press
Shawn Hall spent her $1,200 stimulus check as soon as she received it in
April on bills and rent. Since the pandemic started, the 48-year-old
Charlotte, N.C., resident has been earning less as a self-employed
education consultant, and she is hoping Congress passes another round of
stimulus spending to help her make ends meet. Meanwhile, she has cut
back on dining out and Starbucks lattes, opting to make coffee at home.
The $600 weekly unemployment benefit expired July 31. That had funneled
$250 billion to families this spring, according to a Wall Street Journal
analysis. Last week, President Trump announced a series of executive
actions that, among other things, would continue to provide an enhanced
jobless benefit to Americans.
Even with that action, Ms. Markowska expects spending to decline in
August since it could take weeks to get the checks out. “Even though the
payments will be retroactive, it will be too late to salvage August,”
she said.
Consumer spending has held up. One big factor is that aggregate
household income has actually grown since the pandemic began in March,
boosted by federal stimulus checks of as much as $1,200 for individuals
and the enhanced unemployment benefit.
Many households have used that money to pay bills and build up savings,
with the personal savings rate soaring. As the pandemic-related
shutdowns have extended for months, consumers have started to spend some
of their money, particularly on big-ticket items and projects like
refurbishing their homes.
Business has been steady for Joff Masukawa, a self-employed
life-sciences consultant in his 50s from Washington, D.C. He bought a
1950s ranch-style house in Laurel Park, N.C., in May so that his mother
could move out of a senior-living community. He is renovating the house
and in July bought a refrigerator, stove, dishwasher and microwave.
Mr. Masukawa said he is still spending a bit less than he was before the
pandemic. “What I’m not buying are clothes,” he said. “I’m not buying
anything going out to eat. I’m not going to bars. The only entertainment
we spend money on is really cable-internet service and then the various
streaming things.”
He also suspended his gym membership and, for exercise, recently bought
the Mirror, a product that displays an exercise routine.
—David Harrison contributed to this article.
Write to Josh Mitchell at joshua.mitchell-at-wsj.com and Suzanne Kapner at
Suzanne.Kapner-at-wsj.com
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved.
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