US retail sales growth unexpectedly slowed last month, raising concerns that the expiration of government stimulus measures could be undermining the economic recovery.
Data published on Wednesday showed overall retail sales ticked up only 0.6 per cent in August from the previous month, a slowdown from a 0.9 per cent increase in July and below economists’ expectations for a 1 per cent rise.
The figures offer an early sign of the effects on consumer spending after emergency jobless benefits expired at the end of July.
Lower-income consumers “found that they could no longer sustain spending in the way they did in previous months”, said Neil Saunders, retail managing director of the GlobalData consultancy. “Others, even in more comfortable financial positions, became nervous about spending as the safety net of higher benefits was withdrawn.”
The commerce department data also highlighted the crisis in hard-hit parts of bricks-and-mortar retail. Sales at clothing stores dropped 20 per cent from last year, while department-store sales were down 16.9 per cent.
In stark contrast, spending on categories including DIY, furniture and motor vehicles was higher than it was a year ago. Underlying the growing popularity of online shopping in the pandemic, ecommerce sales jumped 22 per cent from last year.
The high saving rate means that an immediate collapse in sales is unlikely, but the loss of so much cash flow will depress activity
Despite the overall month-on-month slowdown, retail sales are up 2.6 per cent from August 2019. Spending at food and beverage stores remains particularly strong, up 10 per cent year-on-year despite a 1.2 per cent decline from July.
Retail executives have been watching nervously for how consumers are responding as stimulus measures are withdrawn.
So-called control sales — an underlying measure that strips out more volatile items such as food, petrol and building materials — fell 0.1 per cent in August. That was the first decline in four months and missed estimates for a 0.5 per cent rise.
August is usually an important month for retailers given the back-to-school spending, yet sales crept up only 2.9 per cent month-on-month at clothing stores and fell 2.3 per cent at department stores.
Spending at restaurants and bars picked up more briskly, climbing 4.7 per cent from July as parts of the country resumed indoor dining.
Separate data on Thursday also hinted at gathering difficulties for some Americans. According to the National Multifamily Housing Council, 86.2 per cent of apartment households had made a full or partial rent payment for September by the middle of the month, down 2.4 percentage points from last year. In August, 86.9 per cent of rent payments had been made at the same point in the month.
“This sadly comes as little surprise given that Congress and the administration have failed to come back to the table and extend the critical protections that supported apartment residents and the nation’s consumer base during the initial months of the pandemic,” said Doug Bibby, NMHC president.
Congressional Democrats and Republicans still appear to be at an impasse over the size and details of another stimulus package. The Senate last week voted down a $500bn proposal from Republicans, which Democrats had slammed as inadequate.
Economists have cautioned the US economic rebound will stall later this year or early next year in the absence of a new round of fiscal stimulus.
President Donald Trump signed an executive order in August to provide an additional $300 per week to unemployed workers, half the $600 a week federal benefit that expired at the end of July.
But the move was modest in size relative to the legislative proposals and has had a limited impact. It directed $44bn in disaster relief funds to fund the additional jobless benefits starting on August 8 and as of this week only $12.7bn of that money had been paid, according to the US Treasury’s daily statement.
“The key question now is whether sales can hold up after the expiration of the benefits,” said Ian Shepherdson, economist at Pantheon Macroeconomics.
“The high saving rate means that an immediate collapse in sales is unlikely, but the loss of so much cash flow will depress activity. We think core retail sales are poised to fall outright in Q4, unless Congress acts quickly,” he added.