WASHINGTON (Reuters) – Retail sales in the United States accelerated in September, supplementing a good quarter of economic activity, but recovery from COVID-19 recession is at a crossroads as government money is running out and companies continue to lay off workers.
People visit Destiny USA Mall when it reopens, as coronavirus disease (COVID-19) restrictions are relaxed, in Syracuse, New York, United States, July 10, 2020. REUTERS / Maranie Staab / Files
New cases of the coronavirus are also increasing across the country, which could result in restrictions on businesses such as restaurants, gyms and bars, and slash consumer spending. The economy is already shifting down a gear. Other data from Friday showed an unexpected drop in production at factories last month.
While sales growth is strong, it will slow for the rest of the year and into the next year, said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. The slowdown will be even greater if Congress does not pass another stimulus bill. Unemployment remains pervasive throughout the US economy.
Retail sales jumped 1.9% last month as consumers bought cars and clothing, ate out of restaurants and passed out hobbies. This followed an unrevised increase of 0.6% in August.
Economists polled by Reuters had forecast retail sales to rise 0.7% in September. Retail sales rebounded above their February level as the pandemic boosted demand for goods that complement home life, including furniture and electronics. Sales increased 5.4% on an annual basis in September.
Retail sales represent the goods component of consumer spending, with services such as health care, education, travel and hotel accommodation making up the other part.
Excluding autos, gasoline, building materials and food services, sales rose 1.4% last month after declining 0.3% in August.
These so-called basic retail sales correspond most closely to the consumer expenditure component of gross domestic product. They were previously estimated to have fallen 0.1% in August.
Economists have attributed the strength in retail sales to fiscal stimulus, particularly a weekly subsidy paid to tens of millions of unemployed Americans. Robust retail sales in September bolstered expectations for consumer spending and record economic growth in the third quarter.
Growth estimates for the July-September quarter reach an annualized rate of 35.2%. This would recover about two-thirds of the production lost due to COVID-19. The economy contracted at a rate of 31.4% in the second quarter, the largest drop since the government began keeping records in 1947.
A separate Federal Reserve report on Friday showed manufacturing output fell 0.3% last month after rising 1.2% in August. Factory production remains 6.4% below its pre-pandemic level.
U.S. stocks have rebounded after three straight days of losses on retail data and the announcement by Pfizers that it could request emergency use of its COVID-19 vaccine candidate as early as November.
LARGE SALE GAINS
Last month, auto dealer sales jumped 3.6% after rising 0.7% in August. Restaurant and bar receipts rose 2.1%, although the pace slowed from the 4.3% gain in August. Receipts at clothing stores jumped 11.0%.
Even with September’s increases, sales in bars, restaurants and clothing stores remain well below their pre-pandemic levels. Purchases at electronics and appliance stores fell 1.6%.
Online and mail order retail sales increased 0.5%. Sales at furniture stores increased 0.5%. Sales at sporting goods, hobby, musical instrument and book stores rebounded 5.7%. These categories saw sharp year-over-year increases in September, which economists said showed the uneven impact of the recession.
His further proof of the number of top earners who have managed to avert the pandemic by working from home, while most of the lowest paid workers have been forced to choose between jobs that put them at risk, when they can. find, and unemployment, said Chris Low, chief economist at FHN Financial in New York.
The White House and Congress are struggling to come to an agreement on another bailout for businesses and the unemployed. The government reported on Thursday that new claims for unemployment benefits hit a two-month high last week.
The surge in retail sales in recent months has put consumer spending on a higher growth path heading into the fourth quarter, which will likely ensure that the economy continues to grow, albeit at a moderate pace. Growth estimates for the fourth quarter were valued at a rate as low as 2.5% above a 10% pace.
Some economists believe historic savings could dampen consumer spending in the absence of increased government financial assistance. Others, however, warn that the increase in COVID-19 infections and job losses could encourage some consumers to curl up and save their savings.
A University of Michigan poll on Friday showed consumer sentiment edged up in early October compared to September. The University of Michigan noted that slowing job growth, the resurgence of COVID-19 infections and the lack of additional federal relief payments have made consumers more concerned about current economic conditions.
Reporting by Lucia Mutikani; Edited by Chizu Nomiyama, Paul Simao and Andrea Ricci
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