Retail sales show smaller increase in July as spike in coronavirus cases peaked

Retail sales in the month of July showed only a small increase of 1.2%, about half of what economists expected and much smaller than June’s increase of 8.4%.

Automobiles and auto parts led the decline in sales during July with a decrease of 1.2% after having a large increase in May and a smaller increase in June.

Looking at 2020 so far, non-store retailers’ sales are up 24.7% and food sales are up 11.1% over last year.

While the economic numbers give a snapshot of current consumer spending, the coronavirus outbreak has caused many ups and downs in the economy for a number of different reasons.

Ups and downs during pandemic

Americans lost almost 30 million jobs in March and April as the coronavirus caused most non-essential retail businesses to shut down–that’s almost 19% of the more than 158 million total workers in the U.S. economy.

But does this mean that spending will go down 19%? Not necessarily, and here is why.

Many of the jobs lost were eligible for unemployment, which is meant to provide a baseline of income so that people can still pay their rent and buy groceries and other necessities. In addition, the federal government provided an additional $600 per week for those receiving state unemployment.

We now know that up to two-thirds of workers who lost their jobs ended up getting more in unemployment than they did while working. So for many unemployed workers, their spending power might have actually increased even though they weren’t working.

Congress also authorized stimulus checks of $1,200 per person and $500 per dependent that were distributed in April and May, which could have contributed to increased spending on the part of many people.

New shutdowns may have slowed spending

Economists did not expect the rapid spending from June to continue at the same level in July, but they probably also didn’t expect some states including large ones like Texas and California to pause their reopenings when coronavirus cases spiked there.

Many of these states still have bars closed and are requiring retail stores and restaurants to observe strict occupancy limts. Large venue events like concerts, sporting events and movie theaters remain closed.

And perhaps the most serious restraint on consumer spending might be that people just don’t know how long it will take until life gets all the way back to normal. Uncertainty about work, school and business closures may lead people to save more of their money instead of spending it, and that will hold spending down until these shutdowns end completely.

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