Rise in Retail Sales Temporarily Sustainable?

The retail sector in the United States has shown signs of recovery after the pandemic lockdown ended, with retail sales increasing by 7.5% from May. However, the short-term future of retail is facing serious headwinds due to the resurgence of COVID-19 cases in certain populous states.

Shoppers have been shaking off lockdown fatigue, with e-commerce and restaurant takeout helping to keep consumer spending going. The recovery, however, has not been evenly distributed. Temporary closures have delivered a severe blow to large apparel chains, department stores, and malls, and high-profile bankruptcies since May include J.Crew, J.C. Penney, Brooks Brothers, and GNC.

Macy's and Levi's have also had to make cuts, with both companies furloughing or laying off store workers and cutting corporate jobs. These moves are a reflection of the shifts to online shopping and pickup-only operations that have led to job reductions at retailers and restaurants.

Peter Reville, Director of Primary Research Services at Mercator Advisory Group, has provided an overview of the current retail situation. He notes that the pandemic has caused a shift in consumer shopping habits, with a divide between essential and nonessential retailers. The recent retail growth numbers may erode due to the COVID-19 outbreaks in populous states such as Texas, Florida, California, and Arizona.

The federal government pumped trillions of dollars of stimulus into the economy, and consumers have already spent much of this money, which likely played a significant part in the 7.5% increase in retail spending. However, as the stimulus money and enhanced unemployment payouts start to dry up, the impact on consumer spending remains to be seen.

Some states, such as California and New York, are starting to cope with their outbreaks, but others, such as Texas, Florida, and Arizona, are experiencing a resurgence of COVID-19 cases. This resurgence could have a significant impact on the retail sector, particularly in states where retail sales have been on the rise.

The recovery from the economic downturn may take longer than previously thought, as the pandemic continues to disrupt consumer behaviour and the economy. It is essential for retailers to adapt and find ways to continue serving their customers while keeping them safe. Only time will tell how the retail sector will fare in the coming months.