WASHINGTON (Reuters) – U.S. retail sales endured a second straight month of record declines in April as the novel coronavirus pandemic kept Americans at home, putting the economy on track for its biggest contraction in the second quarter since the Great Depression.
The collapse in retail sales reported by the Commerce Department on Friday added to the historic loss of 20.5 million jobs last month in underscoring the deepening economic slump that analysts warn could take years to recover from. Federal Reserve Chair Jerome Powell on Wednesday warned of an “extended period” of weak growth and stagnant incomes.
Retail sales plunged 16.4% last month, the biggest decline since the government started tracking the series in 1992, with only online merchants reporting an increase in receipts. Data for March was revised to show receipts at retailers falling 8.3% instead of dropping 8.7% as previously reported.
Economists polled by Reuters had forecast retail sales would plummet 12.0% in April. Retail sales crashed 21.6% on a year-on-year basis in April.
With businesses around the country reopening as states and local governments ease travel restrictions, which were imposed in mid-March to slow the spread of COVID-19, the respiratory illness caused by the virus, April could mark the trough for retail sales. But a sharp rebound is unlikely as establishments are operating well below capacity.
There are also fears a second wave of COVID-19 infections could keep consumers away from shopping malls.
Stocks on Wall Street were set to open lower after the Trump administration’s move to block semiconductor shipments to China’s Huawei Technologies ratcheted up fears of trade hostilities between Washington and Beijing. The dollar .DXY slipped against a basket of currencies. U.S. Treasury prices rose.
Light motor vehicle sales continued their downward spiral in April, leading to a 12.4% drop in receipts at car dealerships after they plunged 25.7% in March. Cheaper gasoline amid weak demand also depressed sales further at service stations.
Though restaurants and bars have shifted to take-out and delivery service, sales generated were insufficient to plug the gap from the suspension of in-person service. Sales at restaurants and bars plummeted 29.5% last month to a 15-year low. Sales at food and liquor stores surprisingly fell 13.1% last month after surging 26.9% in April.
Grocery store sales dropped 13.2%. Still, the sales level in April was the second-highest on record. The drop last month probably reflects shortages as the price of food consumed at home last month posted its largest increase since February 1974.
Receipts at building material and garden equipment stores fell 3.5% last month. The drop could also be due to a scarcity of some goods because of bottlenecks in the supply chains.
Online retailers recorded another strong month of sales, with receipts jumping 8.4% in April after rising 4.9% in March. Receipts at sporting goods, hobby, musical instrument and book stores slumped 38.0%. Many retailers have reported being sold out of exercise equipment as people set up mini-gyms at home.
Clothing stores collapsed 78.8% last month.
The Commerce Department’s Census Bureau, which compiles the retail sales report said though “many businesses are operating on a limited capacity or have ceased operations completely,” it had “determined estimates in this release meet publication standards.”
Excluding automobiles, gasoline, building materials and food services, retail sales tumbled 15.3% last month after a surprise 3.1% jump in March. These so-called core retail sales correspond most closely with the consumer spending component of the gross domestic product report.
The dive in core retail sales in April supports economists’ predictions of a record collapse in the rate of consumer spending of 20% to 40% in the second quarter.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, tumbled at a 7.6% annualized rate in the first quarter, the sharpest drop since the second quarter of 1980. The economy contracted at a 4.8% rate in the January-March quarter. Output is expected to contract at as much as a 40% pace in the second quarter, the deepest since the 1930s.
Source: Read Full Article