Though the impacts of the coronavirus pandemic will last for months or years to come, retailers are finally seeing a dim light at the end of the tunnel.
The U.S Commerce Department reported on June 15 that retail spending climbed 17.7% in May after falling dramatically in April. As more cities and states allow restaurants and shopping centers to open, retail shopping will continue to climb, but despite this, spending is still down compared to pre-pandemic times.
Optimism With a Dose of Caution
May’s rebounding sales figures suggest that the U.S economy may finally be lurching back to life, but the reality isn’t so simple. The underlying data reveals a complicated road to recovery, especially as many stores and restaurants are forced to open with fewer employees.
“I think a lot of it is lockdown fatigue,” said Beth Ann Bovino, chief U.S. economist at S&P Global. “I would caution not to be fooled by this large gain. We still have a long way to go in repairing the economy.”
Jerome H. Powell, chair of the Federal Reserve, echoed Bovino’s warning. The “level of output and employment remain far below their pre-pandemic levels,” he said, “and significant uncertainty remains about the timing and strength of the recovery.”
Tax Refunds and Stimulus Checks Spurred Spending, But Will Soon Run Out
Many Americans used their tax refund and stimulus check money to enjoy extra discretionary spending in May. However, those sources of extra cash will run out in the coming month. Congress has given no indication that it intends to pass another round of assistance, leaving experts to question whether Americans will be able to sustain increased spending.
“By the time we get into July, those tax refunds will probably be largely spent,” explained Aneta Markowska, the chief financial economist for the investment bank Jefferies, “and then you’re back to, hey, what’s the underlying employment growth? Because that’s going to have to be the key driver of spending going forward.”
Retail Outlets Push For Continued Growth
Regardless of how long May’s spending boost remains, retailers are working to capture as much consumer activity as possible. Kohl’s reported that its reopened stores have been 50 percent to 60 percent as productive as normal. Gap, which owns Old Navy, Banana Republic, and Athleta, said its stores are generating sales near 70 percent of their performance one year ago.
In fact, clothing sales rose 188% from April to May, while furniture rose 90% from April and motor vehicles rose 44%.
“Is it possible the worst of the coronavirus pandemic is behind us? Maybe, but we are not out of the woods yet, and uncertainty abounds,” National Retail Federation Chief Economist Jack Kleinhenz said. “With such disruptions, it is difficult to tally the damage or determine the future.”