Retail sales in the United States decline; high unemployment, COVID-19 rise looms over recovery

WASHINGTON (Reuters) – US retail sales rose more than expected in June as consumers bought high-priced items like motor vehicles and went out to dinner, but a resurgence in new COVID cases- 19 is impacting the budding recovery, keeping 32 million Americans unemployed benefits.

Economists attributed the second consecutive monthly increase in retail sales the Commerce Department reported on Thursday to additional $ 600 weekly checks from the government for the unemployed, a benefit that will end on July 31. The expiration of the program will leave millions of workers. and the self-employed, among others, who do not qualify for regular state unemployment insurance, without income.

Economists warned that this would undermine consumer spending and the overall economy at a time when new coronavirus cases are soaring, especially in the densely populated south and west, and forcing some authorities in these regions to close businesses. again or pause the reopening.

“The path ahead for the consumer seems a little hazy and uncertain, to say the least,” said Chris Rupkey, chief economist at MUFG in New York. “July spending faces winds against states closing again due to the second wave of the coronavirus. August spending is in question because those additional $ 600 per week unemployment checks stop in late July. ”

Retail sales rose 7.5% last month after jumping 18.2% in May, which was the biggest gain since the government began following the series in 1992. Economists polled by Reuters had forecast sales retailers would advance 5% in June.

Retail sales have rebounded as companies resumed operations after being closed in mid-March in an effort to curb the spread of respiratory disease. Retail sales in June were driven by an 8.2% increase in revenue at car dealerships. Consumers increased their spending on furniture, clothing, electronics and appliances, hobbies, musical instruments, and bookstores. Revenue in restaurants and bars soared 20.0%.

But online and mail order retail sales fell 2.4%. Sales also fell in building materials and supermarkets.

Shares on Wall Street were trading lower amid concerns over the explosion in coronavirus cases. The dollar slipped against a basket of coins. US Treasury prices rose.


Excluding automobiles, gasoline, construction materials, and food services, retail sales increased 5.6% in June after increasing 10.1% in May. These so-called main retail sales correspond more closely to the consumer spending component of the gross domestic product report.

FILE PHOTO: People line up outside the Kentucky Career Center before it opens to find help with their unemployment claims in Frankfort, Kentucky, USA, June 18, 2020. REUTERS / Bryan Woolston

The rebound in core retail sales did not change expectations that consumer spending collapsed in the second quarter. However, it set spending on a path of higher growth for the third quarter.

Economists expect consumer spending, which accounts for more than two-thirds of America’s economic activity, decreased at an annualized rate of up to 35% in the April-June quarter. That could result in a drop in GDP at a rate of around 31% in that period. The economy contracted at a rate of 5% in the January-March quarter, the biggest contraction since the Great Recession 2007-2009.

“Activity slowed in May and June, albeit at lower levels than prevailed before the pandemic,” said Michael Feroli, chief economist at JPMorgan in New York. “More recently, several high-frequency indicators suggest that May and June were the easy months, and that the resurgence of COVID-19 cases is leading to slower activity gains in July.”

On Thursday, separately, the Labor Department said 1.30 million people applied for state unemployment benefits during the week ending July 11, 10,000 fewer than in the previous period. Economists had forecast 1.25 billion claims last week.

The weekly unemployment claims report, the most timely data on the health of the economy, showed large increases in the states of California, Georgia, Florida and Washington, which are experiencing an increase in COVID-19 cases.

Claims for the first time reached a record high of $ 6,867 million at the end of March. They remain approximately twice their highest point during the Great Recession 2007-09. Including a government-funded program, 2.23 million people filed claims last week.

FILE PHOTO: A shopper wearing a protective mask tries on clothes at a retail store after the outbreak of coronavirus disease (COVID-19), in New York City, New York, USA, July 5 2020. REUTERS / Jeenah Moon / File Photo

The number of people who received benefits after an initial week of aid fell from 422,000 to 17,338 million in the week ending July 4. These so-called continuous claims, which are reported with a delay of one week, exceeded a record of 24,912 million in early May.

There were 32 million people who received unemployment checks across all programs in the last week of June, 433,005 fewer than the week before. According to economists, this number, which is reported with a delay of two weeks, offered a more accurate reading of the labor market.

Economists say unemployment remains uncomfortably high due to a second wave of layoffs, which could escalate as COVID-19 infections reduce demand and bankruptcies increase, especially in the retail sector. American Airlines said Wednesday it was sending 25,000 possible license notices to front-line workers.

“The data probably understates the true state of the job market,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. “Companies are beginning to warn that there could be major layoffs in the coming months.”

Lucia Mutikani’s report; Chizu Nomiyama and Andrea Ricci edition

Our Standards:Thomson Reuters Trust Principles.