Millions of people across the U.S. and elsewhere lost their jobs. Moreover, some of them are still out of work. Hopefully, U.S. retail sales increased in October. However, retail sales missed expectations. However, this is not the end of the story. Retail sales could slow further, affected by rising new Covid-19 infections and declining household income. It is not surprising as millions of unemployed Americans lose financial support provided by the government.
According to the Commerce Department, retail sales rose 0.3% in October. It is worth mentioning that data for September was revised down to show sales jumping 1.6% instead of increasing 1.9% as previously reported. Interestingly, economists expected retail sales to grow by 0.5% in October.
People should take into account that, excluding automobiles, gasoline, building materials, and food services, retail sales nudged up 0.1% after a downwardly revised 0.9% increase in September. Importantly, these so-called core retail sales correspond most closely with the consumer spending component of gross domestic product (GDP).
Retail sales and coronavirus pandemic
The coronavirus pandemic is not over yet. Unfortunately, daily new coronavirus cases have gone past 10,000 since early this month. As a result, the number of infections in the country surpassed 11 million. It is worth mentioning that some state and local governments reintroduced new restrictions on businesses.
However, restrictions and consumer avoidance of crowded places like bars and restaurants could affect spending and trigger another wave of layoffs.
As a reminder, the supplement, which was part of more than $3 trillion in government coronavirus relief, ended for unemployed and underemployed workers. This is not the end of the story, as millions more will lose benefits next month.
A government-funded program for the self-employed, gig-workers and others who do not qualify for the regular state unemployment program expires in December.
Another government program providing benefits for people who exhausted their six months of eligibility for state aid is also coming to an end. People should keep in mind that a second rescue package is unlikely before President-elect Joe Biden takes office in January.
Importantly, economists expect moderate retail sales growth for the rest of the year. This factor will contribute to slower economic growth after a historic rebound in the gross domestic product in the third quarter.
Last but not least, growth estimates for the fourth quarter are below a 5% annualized rate. Joe Biden should work with lawmakers to reach an agreement regarding a second rescue package in the nearest future.