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Consumer spending activity, which is one of the pivotal factors driving the economy, has ebbed. The surge in COVID-19 cases, reimposition of restrictions in some states and fading of the initial coronavirus-relief package compelled Americans to tighten their purse strings. Incidentally, U.S. retail sales declined for a second successive month in November, thereby pointing to a sluggish start to the holiday shopping season and raising concerns about the recovery of the economy from a pandemic-induced recession.
Economists have been warning that once extra unemployment benefits end, consumer spending activity may drop. And this is what has happened. Again, moderation in hiring activity and increase in the number of new unemployment claims have been hurting consumer sentiment and in turn the willingness to spend. Clearly, these necessitate more financial support to keep the economic momentum alive. Rise in consumer spending activity is vital for any economy.
Well, hopes have risen on another stimulus as lawmakers push for a new $900-billion coronavirus relief package that also includes stimulus checks for individuals, per media reports. If all goes well, this would provide financial assistance to businesses and households that have been bearing the brunt of the coronavirus crisis. Also, mass vaccination will lend the much-needed support to the economy.
November Retail Sales
The Commerce Department stated that U.S. retail and food services sales in November fell 1.1% to $546.5 billion following a revised reading of 0.1% decline in October. This was the steepest decline in seven months, with spending on automobiles, home furnishing, electronics, apparel and restaurants taking a hit. However, spending on groceries and building supplies increased.
Analysts highlighted that the month-on-month decline in November retail sales might be due to the early start of the holiday shopping deals that pulled some spending in October. Markedly, Amazon’s AMZN two-day special Prime Day mega shopping event, Target’s TGT "Deal Days" and Walmart’s WMT five-day “Big Save Event” were held in October. Best Buy BBY and Bed Bath & Beyond BBBY also offered lucrative deals.
We note that U.S. retail sales improved 4.1% from November last year. Although sales at Internet retailers showed meager growth of 0.2% during the month under review, the metric rose roughly 29.2% on a year-over-year basis as more people opted for e-route over physical retailing amid the pandemic. According to Adobe Analytics, U.S. consumers spent $9 billion online on Black Friday. This reflects an increase of 21.6% year over year. Notably, online sales hit $10.8 billion on Cyber Monday, reflecting a 15.1% increase over last year.
Keeping consumers’ product preferences and growing inclination toward online shopping in mind, retailers have been replenishing shelves with in-demand merchandise and ramping up investments in digitization. Companies have been directing resources toward advancing omni-channel capabilities, enhancing supply chain and providing faster delivery options, be it curbside pickup or delivery at home.
Quite apparent, November sales data has been disappointing, calling for some serious action on the stimulus front. We note that a further cut back on spending on part of consumers will only inflict more pain to retailers.
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