Retail sales have largely recovered from the pandemic heading into the holiday season but the growing number of COVID-19 cases remains a threat and more federal stimulus could help the economy, National Retail Federation Chief Economist Jack Kleinhenz said Monday (Nov. 1).
“Strong growth in retail sales during the last few months points to the resiliency of consumers even in this disruptive pandemic environment,” Kleinhenz said. “Taking in all the evidence available, the U.S. economic recovery has progressed more quickly than generally expected.”
Retail and technology titan Amazon reported stellar third-quarter earnings on Friday, most notably net sales growth of 37% to $96.1 billion. The quarter was the third-largest revenue achievement in Amazon’s history and far exceeded Wall Street’s $92.7 billion consensus estimate. The third quarter is normally quiet for Amazon, but as more consumers turn to online orders amid the pandemic, the retailer said its fulfillment centers and delivery routes have been running at or near full capacity since early May. Amazon also said demand remains robust heading into the holiday season.
Andrew Lipsman, an analyst at EMarketer, said rising U.S. COVID infection rates may depress in-store shopping this holiday season and beyond but that could result in a “blowout holiday quarter” for Amazon, and online retailers.
Retailers from Amazon to Target and Walmart have tweaked their Black Friday and holiday sales strategies this year to try to spread out the spending across multiple trips and online features. The idea according to Walmart U.S. CEO John Furner is keep shoppers and employees safe by keeping social distancing guidelines and avoided crowded events like traditional Black Friday sales extravaganzas of the past.
Walmart CEO Doug McMillon has also been vocal about the need for Congress to provide more federal stimulus to consumers and small businesses who continue to suffer financially from the pandemic. Kleinhenz on Monday agreed with Federal Reserve Chairman Jerome Powell’s recent call for additional federal stimulus, which the chairman said “will not go to waste” even if it is more than necessary.
“While there might be sufficient momentum and resiliency to propel the economy in the months ahead, additional fiscal policy support is critical to ensure that the recovery doesn’t stall,” Kleinhenz said.
Kleinhenz’s remarks came in the November issue of NRF’s Monthly Economic Review which noted that retail sales have been up month-over-month and year-over-year each month since June. Retail sales have completed a V-shaped recovery and are up 8.6% since January, according to data from Harvard University’s Opportunity Insights research project.
Household spending on retail goods has helped overall consumer spending, which was down 16.1% year-over-year in April but down only 1.9% as of August, according to the U.S. Commerce Department.
The report pointed to increased disposable personal income, which was up 5.4% year-over-year as of August, and a savings rate of 14.4% that has remained in double digits for six straight months. Even though government stimulus has tapered off, “savings are available if consumers decide to spend more aggressively,” Kleinhenz said. Consumer confidence remains below pre-pandemic levels but is rising.
The National Retail Federation has postponed the release of its annual holiday spending forecast awaiting additional economic data. Deloitte predicts holiday sales growth between 1% and 1.5% from last year. Bain & Company’s forecast is 2% growth, half of the 4% growth achieved in recent years. NRF did release the results of a recent survey by Prosper Insights & Analytics that indicated an average spend of $997, down about $50 from last year.