Overall retail sales rose by 1.2% last month. A storefront in San Francisco.
Photo: Justin Sullivan/Getty ImagesThe harrowing decline and heartening rebound in consumer spending is over. Now comes the hard slog.
The Commerce Department on Friday reported that overall retail sales rose by 1.2% in July from June. That was less than the 2.3% increase economists expected, but with June sales raised to 8.4% from an earlier reading of 7.5%, it amounts to a wash.
The broader message is that after plunging in March and April as the Covid-19 crisis took hold, and rebounding strongly in May and June, consumer spending hasn’t been doing much of anything lately. Indeed, an analysis conducted by nonpartisan research group Opportunity Insights of credit- and debit-card data collected by Affinity Solutions shows that since mid-June, spending by U.S. consumers has been basically flat. JPMorgan Chase credit and debit-card data analyzed by economists at the bank shows the same.
That still leaves the current level of consumer spending well above its average in the second quarter. So absent another big drop in retail sales, gross domestic product should register a significant rebound in the third quarter.
Another steep drop doesn’t seem likely. Even though there are some people, such as Federal Reserve Bank of Minneapolis President Neel Kashkari, who are advocating for another lockdown as a way to crush the spread of the virus, there is little political will to take that sort of step. Rather, the U.S. may have settled into a pattern whereby when a state or city sees new cases flare up, officials tighten up restrictions and people become a little more cautious, while in areas where new cases are falling, the opposite happens.
Meanwhile, the supplemental $600 a week the federal government was providing to unemployed workers expired at the end of July, and talks over a new relief package have stalled. Absent a resolution, many Americans will have less money to spend. Additionally, with many schools opting for remote learning plans this fall, parents are facing constraints on their ability to work, and earn.
Perhaps the most likely outcome is that spending neither grows nor falls very much until the virus is actually brought under control—the economic equivalent of a low-grade fever. Things could be worse, but that doesn’t mean we can’t wish they were better.
Write to Justin Lahart at justin.lahart@wsj.com
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August 14, 2020 at 11:04PM
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