WASHINGTON (AP) – Americans increased their spending at retail stores and restaurants in July for a third straight month, but some evidence suggests sales are weakening with the expiration of bailouts for governments that previously put more money in the pockets of the people had.
Friday’s report of the Department of Commerce found that retail purchases increased 1.2% last month with a seasonal adjustment. The gains of the past three months have now brought retail purchases back to their levels before dancing in March and April when the pandemic shook businesses and paralyzed the economy.
However, with the total income of Americans now likely to shrink, economists expect spending to disappear further. The July sales increase was much smaller than the 18.3% gain in May and the 8.4% increase in June, when shoppers flocked to newly opened businesses. In July, the viral outbreak resumed in a large part of the nation, causing some businesses to shut down again.
Sales at restaurants and bars grew 5% last month after much robust increases of more than 30% in May and 27% in June. Restaurant and bar revenue remains about a fifth below its levels of a year ago.
Solid sales profits were posted last month in electronics and appliance stores, reflecting the needs of most higher-income people who now work from home. Purchases at clothing stores, gas stations, and drugstores also increased. Furniture sales were flat after an enormous profit in June.
The problem now is that roughly 28 million laid-off workers no longer receive the $ 600-a-week federal unemployment benefit they received in addition to their state benefits, but which expired last month. In addition, a $ 1,200 incentive check sent to many Americans in April and May will not be repeated. Negotiations in Congress over a new economic relief package have collapsed and left no sign of resuming coming soon.
Many retailers have said that the additional unemployment support helped boost the sale of clothing and other non-discretionary items in the spring and early summer.
“Consumers are largely protected from economic realities by the various incentive and benefit programs,” said Neil Saunders, CEO of GlobalData Retail. “However, many of those benefits expired at the end of July, and August will be the first month when the cool wind of economic turmoil hits many households.”
Consumers began cutting spending in late July, according to a GlobalData survey, and spending fell sharply in the first week of August. Many consumers spend more around the house and on recreational equipment while still maintaining a nervous view.
Jennifer Zaspel and her husband, who live in Milwaukee, recently purchased a $ 2,000 bike and built a patio in their backyard. However, Zaspel, a 33-year-old psychiatrist, said her full salary was reinstated just after the academic institution she works for had temporarily cut her salary in a cost-saving move. Afraid of another wave of viral cases, she intends to resume her ascent.
“We’ll keep things pretty tight, just because I expect another stream,” said Zaspel, who buys second-hand clothes and toys for her 7-month-old son.
Friday’s retail sales report accounts for only about a third of all consumer spending. The rest includes services – from haircuts and memberships to gymnastics to movie tickets and hotel rooms – all of which were disproportionately affected by the pandemic and have yet to recover
In the four years April-June, consumer spending plummeted by a record amount, causing the economy to shrink at a previously unheard of annual rate of 32.9%. Economists have predicted that growth in the quarter ended July-September at an annual rate of 20%, although that pace would still leave the economy below pre-pandemic levels.
The government figures mask a huge shock in the retail sector, with Americans sharply withdrawing from shopping and spending more online. More than 40 retailers have filed for bankruptcy protection this year, about half of them since the pandemic. That is almost double the number for the whole of 2019.
In recent weeks, member company Ann Taylor has declared bankruptcy. So did the Lord & Taylor department store chain and the Stein Mart discount store chain, which had been in business for 112 years.
Stein Mart cited the recurrence of coronavirus cases in Florida, Texas and California as a major factor in its bankruptcy filing. The company has many stores in those states, a fact that hurt customer traffic and drained its cash. And Rent the Runway, the pioneer of fashion rentals, confirmed Friday that it will close all five of its stores before closing, as it focuses on expanding its drop-off boxes.
The upscale outdoor CityPlace Doral mall in Miami had closed in March, opened in May and then enjoyed strong sales and traffic in June, according to Mauro Olivieri, the general manager of the upscale outdoor mall’s mall. When the virus re-emerged in July, local mandates forced it to shut down food inside.
President Donald Trump has signed an executive order that would replace him the now disbursed $ 600 a week in federal unemployment assistance with $ 300 a week from a disaster relief fund. However, the states would require to create a separate payment system that would likely take weeks. In the meantime, the $ 600 loss will cut recipients’ incomes, on average, by half to three-quarters.
That perspective has unnerved Tia Ferguson. A 40-year-old substitute teacher in Columbus, Ohio, Ferguson was fired in March. In early June, she was able to receive both her state’s unemployment benefit and the $ 600 federal check. It is unclear when she may be recalled to work, and she is reluctant to learn in person until after a vaccine has been approved. A patient with diabetes and asthma worries them about the risks of going back to class.
Ferguson’s husband earns a living as a car mechanic, but still builds a business he recently started. The couple has taken to reducing the time for video games of their three children to save on electricity.
With her weekly unemployment benefit now just $ 171, Ferguson has cut back on shopping and gone on Facebook to find information on pantries for food.
“I don’t know when I will have a stiff stream of income that is even close to what I made,” she said.
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The Innocence reported from New York.
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