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The devil is in the details when it comes to rising retail sales

Sabri Ben-Achour Sep 16, 2020
Heard on: Marketplace
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Patrons dine at an outdoor restaurant in downtown San Diego, California. Restaurant sales growth accelerated in August. Sandy Huffaker/AFP via Getty Images
COVID-19

The devil is in the details when it comes to rising retail sales

Sabri Ben-Achour Sep 16, 2020
Patrons dine at an outdoor restaurant in downtown San Diego, California. Restaurant sales growth accelerated in August. Sandy Huffaker/AFP via Getty Images
HTML EMBED:
COPY

Retail sales rose 0.6% last month, the Commerce Department says. That’s less than the previous month. Things are slowing down, and it’s another sign the economic bounceback is itself slowing down.

If you don’t have more money, you’re probably not going to spend more money. 

“This all reflects the fact [that] at the end of July, the supplemental unemployment benefits were ended — the extra $600 people were getting,” said Tendayi Kapfidze, chief economist at LendingTree. 

Less pandemic relief money in unemployed people’s pockets slowed down spending growth. Still, from afar, the retail segment as a whole has made a pretty strong recovery.  

“Sales as of August are higher than they were heading into the pandemic in February,” said James Bohnaker, associate director with IHS Markit.

But if you look into the details, it’s chaos and carnage. Online sales are up 22% year-over-year, restaurant sales are still down 15%. Building materials up 15%, clothing’s still down 20%. 

One thing that’s going on here is Americans trapped at home have moved some of their spending around. 

“There is a switch from services consumption, which makes up the bulk of our consumption to goods consumption,” said Constance Hunter, chief economist at KPMG.

People might not be going to the dentist, but might buy a bike.

“It’s one of the reasons we’ve seen manufacturing rebound more than we would have normally expected in a normal recession,” Hunter said.

But as time goes on, we’re going to start going back to the dentist, and we won’t need another bike.

“It’s one of the reasons we think we’ll see a bit of a plateau in retail sales as we go into the fourth quarter, as the economy continues to open and we see people begin to purchase those services again,” Hunter said.

People will buy services at the expense of goods. One sign we’re headed there is actually buried in the restaurant data — restaurant sales growth accelerated in August. It may be a sign that people are getting more and more comfortable going out, at least for now.

COVID-19 Economy FAQs

What are the details of President Joe Biden’s coronavirus relief plan?

The $1.9 trillion plan would aim to speed up the vaccine rollout and provide financial help to individuals, states and local governments and businesses. Called the “American Rescue Plan,” the legislative proposal would meet Biden’s goal of administering 100 million vaccines by the 100th day of his administration, while advancing his objective of reopening most schools by the spring. It would also include $1,400 checks for most Americans. Get the rest of the specifics here.

What kind of help can small businesses get right now?

A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.

What does the hiring situation in the U.S. look like as we enter the new year?

New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.

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