With the majority of the country still under strict stay-at-home mandates as a result of the COVID-19 pandemic, U.S. consumer activity is expected to have taken another massive blow in April following a record plunge in March.
Economists surveyed by Bloomberg expect headline retail sales to have plummeted 11.9% in April, down further from an 8.4% decline in March. Core retail sales, excluding the volatile auto and gas components, likely tumbled 7.6% following a decrease of 2.8% in the prior month.
“Retail sales already saw their sharpest monthly fall on record in March but, with lockdown measures only coming in during the second half of the month, sales are set to fall even further in April,” Capital Economics Senior U.S. Economist Michael Pearce wrote in a note May 8.
Pearce predicted that the categories that were hit in March will have continued to have declined in April. “Spending on food and drink services is likely to have led the declines and, while that means grocery store sales will have remained elevated, they also look set to have dropped back in April after an initial wave of stockpiling. Online sales may be the only sector to have seen an increase.”
Within core components, consumer spending online rose 3.1% and jumped 26.9% at grocery stores in March. However, sales at department stores sank 19.7%, furniture stores saw a 26.8% drop in spending, sporting goods sales fell 23.3% and spending at clothing retailers plummeted the most at 50.5%.
Meanwhile non-core components also saw some hefty declines in activity in March. Auto and auto parts sales plunged 25.6% and gas sales fell 17.2%. Sales from food services was down 26.5%, but spending on building materials increased 1.3%.
Consumer spending represents about 70% of GDP and was considered the bright spot within the U.S. economy prior to the COVID-19 outbreak. Though there have been and will likely be sharp declines in consumer activity in the near term, Wells Fargo economist Jay Bryson does not expect the damage to last long.
“With some stores shuttered for the entire month of April, the register receipts will likely be grim. The cratering in sales during April could mark the low point of the cycle as even a gradual reopening in May offers scope for at least some kind of an increase,” Bryson explained in a note May 8. “If the government’s preferred forecasts are right, and the virus retreats quickly this summer, the broader reopening and pent-up demand suggest the retailers who have been able to survive the shutdown should see sales normalize in the second half of the year.”
According to Bank of America debit and credit card transaction data, consumer activity improved meaningfully in May. “Total card spending is now running at a pace of -10% yoy over the 5- day period of May 3- May 7, a big shift from the low of -36% yoy during the last 5 days of March,” the firm wrote in a note Wednesday.
Bank of America outlined two key reasons for the recent improvement. First, stimulus checks started to get distributed around mid-April through direct deposits which was then followed by paper checks. Second, after weeks of unsuccessful attempts at filing unemployment claims, backlogs have been processed in many states.
As of Thursday afternoon, there were more than 4.3 million coronavirus cases and 297,500 deaths worldwide, according to Johns Hopkins University data. In the U.S., there were 1.39 million cases and 84,100 deaths.
Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.
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