A Marshalls & Home Goods retail store in the US. Americans kept shopping in July with retail sales rising 1.2% from June, reflecting a rare bright spot in the battered economy. Image Credit: AP

Washington: Even as coronavirus infections continued to spread, in-person school reopening plans were scrapped and unemployment stayed near record highs, Americans kept shopping in July with retail sales rising 1.2% from June, reflecting a rare bright spot in the battered economy.

The jump in sales reported Friday by the Commerce Department, though far smaller than the increases in the previous two months, showed that the bounce back in spending to pre-pandemic levels was not a fluke. It was instead a sign that consumerism, buoyed by government support, remained resilient even as many other facets of American life were increasingly bleak.

See more

“It shows there is a willingness and a desire to spend,” said Michelle Meyer, chief U.S. economist at Bank of America. “There is no doubt the recovery in consumer spending has been robust.”

Much of that recovery has been helped by the $600 a week in unemployment assistance, which expired at the end of July.

The three consecutive months of sustained retail recovery, which has brought sales above where they were in February, is exactly what policymakers were hoping the stimulus money would accomplish. By spending their benefits on food, clothing and appliances, rather than saving the money, Americans have helped keep many retailers and their employees and suppliers afloat.

The retail rebound is likely to bolster arguments in Congress that a robust form of supplemental unemployment assistance should be extended. Without a large subsidy, economists predict, consumption will stall in August and into the fall, damaging the broader economy.

“It’s very important to the economy that these talks in Washington come to fruition,” said Mickey Chadha, senior credit officer at Moody’s Investors Service.

Sales at electronics and appliance stores jumped 23% in July while spending at clothing and clothing accessories stores rose almost 6%. Still, the electronics and appliance sales were down 3% from a year earlier, while clothing was down 21%. Some areas that saw strong sales in the previous month, like furniture and home furnishings stores and the category of sporting goods, hobby, musical instruments and bookstores, were flat or declined in July.

Still, there are certain sectors of the industry that may never truly return until a vaccine is approved and widely distributed, allowing people to shop and dine indoors again without fear.

Read more

Foot traffic to brick-and-mortar stores selling primarily discretionary goods, including apparel retailers, remains down by as much as 43% from last year, according to research from Morgan Stanley.

That persistently low traffic - following weeks and even months of temporary store closures - helps to explain why a record number of retailers have declared bankruptcy or closed down during the pandemic, even as sales of products like groceries, at-home entertainment and appliances have been booming. Shoppers have seemed more willing to venture out to open-air shopping centers, like Tanger Factory Outlet Centers, which said on Aug. 5 that even with reduced hours, foot traffic to its centers in the preceding six weeks had rebounded to about 85% of previous-year levels.