Report shows resilience of economic recovery and suggests households are boosting spending
By guest author Josh Mitchell. Sarah Chaney Cambon contributed to this article, both from Wall Street Journal.
The U.S. economic recovery remains intact despite the latest wave of virus infections, with Americans boosting shopping and employers resisting layoffs.
Sales at the nation’s retailers rose 0.7 % in August, the Commerce Department said Thursday, despite a big decline in car sales related to product shortages and shipping problems. Excluding cars, sales rose a robust 1.8 %.
After sales fell in July, economists and business groups warned of further declines caused by Delta, a highly contagious strain of the Covid-19 virus. Governors and mayors imposed new rules on mask wearing and capacity to prevent the virus’s spread. Instead, consumers appear to have shifted spending rather than rein it in. They shelled out more last month on furniture, groceries, hardware, and goods purchased online.
Meanwhile, initial jobless claims—a proxy for layoffs across the U.S.—rose slightly last week but remained near pre-pandemic lows, the Labour Department said. Claims grew 20000 to 332000. Claims have trended lower since mid-July, a sign employers are holding on to workers.
Layoffs caused by Hurricane Ida, which hit Louisiana at the end of August, likely contributed to the increase, economists said.
“Delta? What Delta?” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note to clients. “This report suggests Delta fears aren’t stopping people spending some of their abundant cash resources on goods, even as they retreat from services.”
Delta appeared to weigh on certain industries. Sales at restaurants were flat last month after rising briskly for most of this year. Despite the August pause, restaurant sales have climbed nearly 32 % over the past year.
Sales also rose only modestly at gasoline stations, a sign some households scaled back summer travel plans in response to the Delta-related wave of infections.
Meanwhile, a global shortage in computer chips continues to weigh on car sales, which fell 3.6 % last month. Dealership inventories are running low, preventing consumers from buying cars despite strong demand.
But broader forces are uplifting the retail sector and economic recovery: a historically high level of savings, strong job growth and rising wages.
Retail sales—including spending on restaurant meals, cars, cellphones and computers—are a big slice of consumer spending, which itself is the largest source of economic demand in the U.S.
“Households have plenty of income to spend,” said Stephen Stanley, chief economist at Amherst Pierpont, a bond trading firm.
In recent days, some economists have downgraded estimates for economic growth in the third quarter because of the Delta variant and bottlenecks in the global supply chain. JPMorgan Chase on Wednesday projected gross domestic product to expand at a 5 % annual rate in July through September, down from a prior estimate of 7 %, citing lower demand and production shortages, particularly in the car industry.
There are signs the Delta variant wave has crested. Economists believe retail sales could recover quickly as more Americans become vaccinated and feel safe again to venture out, and as product shortages ease.