The economic challenges from the COVID-19 pandemic will continue in 2021, but the recently approved federal stimulus will help maintain and accelerate the nation’s ongoing recovery, said Jack Kleinhenz, chief economist for the National Retail Federation.
Kleinhenz described 2020 as a whirlwind year wrought with economic challenges. He predicts 2021 will be just as eventful as economic recovery faces many uncertainties.
“Recoveries do not proceed in a straight line and the prospects for volatility over the next few months are high. Nonetheless, just like the old Timex watch commercials, the economy takes a licking but keeps on ticking. We expect retail sales spending to see a boost from the new round of stimulus,” Kleinhenz said.
He said consumers responded quickly to last spring’s stimulus checks, and distribution of the new checks will come at a critical time that will help carry 2020’s momentum into 2021. Legislation signed Dec. 27 will provide one-time $600 stimulus checks to individuals making up to $75,000 a year and extends $300 weekly checks for the unemployed for almost three months. Kleinhenz said the new aid is particularly important to low-income families and the unemployed, who have faced challenges paying day-to-day bills in recent months.
He said economic activity will likely resume after the winter months and into mid-year as the COVID-19 vaccines allow more activities to resume.
“The availability of a vaccine during the first quarter – historically a soft spot in the economy every year even without a pandemic – couldn’t be better,” he said.
Kleinhenz said the vaccine news is encouraging and hopefully will mean a sharp decline in infections. He expects consumers will begin to resume travel and taking vacations by the summer.
The National Retail Federation reports retail sales over the first 11 months of 2020 were up 6,6% from the year-ago period. November spending was up 8.8% from the prior-year and the trade group said its holiday forecast of between 3.6% and 5.2% growth is on track. The full holiday sales report will be released Jan. 15 by the Census Bureau.
Kleinhenz said there has been some shift in spending through 2020 and into 2021 with dollars flowing away from travel, dining out and entertainment, and into big-ticket items for the home such as appliances and furniture. He said homeowners are also seeing rising home values and higher stock prices which has been a plus for spending among the much of the middle class. That has not been the case for the unemployed, or under-employed. NRF said new stimulus checks should encourage consumers to “re engage” on non-durable goods and services.
He said consumer spending and retail sales have varied among retail sectors and “economic uncertainty is very prevalent and at near-record levels.”
“Overall economic activity is not expected to return to pre-pandemic levels until late 2021 and employment at pre-pandemic levels is unlikely to return until well into 2022 or possibly 2023,” Kleinhenz said.