The Economy

Retail Sales Fall 1.1% in Largest Pandemic Drop

“The economy will bounce back strongly in [Q2] as vaccine deployment reaches critical mass but until then it’s going to be a long, bleak winter."
Matthew HellerDecember 16, 2020

U.S. retail sales fell in November by the largest amount since the onset of the coronavirus pandemic, setting the stage for what could be a “bleak winter” for retailers before vaccines are widely available.

The Department of Commerce reported Wednesday that retail sales dropped 1.1% last month, the second straight monthly decline. Economists had expected sales would be down 0.3%.

Sales fell at restaurants, auto dealers, gas stations, clothing stores, department stores, and places that sell home furnishings and electronics. The only segments to post higher sales were grocers, home centers, and internet retailers — and even then the gains were small.

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The drops over the past two months “marked the end of several months of growth in retail spending after sharp declines earlier this year when the coronavirus pandemic triggered widespread business closures,” The Wall Street Journal said.

With federal relief programs having expired, future relief uncertain, and the coronavirus surging, economists see more pain ahead for retailers until mass distribution of vaccines coaxes shoppers back into stores.

Congressional leaders on Wednesday were reportedly close to a deal on a $900 billion relief bill that was expected to include enhanced unemployment insurance and another round of direct payments to households.

“The economy will bounce back strongly in the second quarter as vaccine deployment reaches critical mass, allowing restrictions to be eased, but until then it’s going to be a long bleak winter,” said Paul Ashworth, chief U.S. economist at Capital Economics.

James Knightley, an economist at ING Financial Markets, expects gross domestic product to contract about 1.2% in the first quarter of 2021 after increasing around 1.5% to 2% in the fourth quarter of 2020.

“We’ve got to be braced for a period of two, three, four months of extreme vulnerability for the economy,” he told the Journal.

Bars and restaurants posted a 4% drop in sales in November, marking the second decline in a row and the largest since April during the height of the pandemic, authorities put new limits on indoor dining or hours of operation. Even internet sales, a pandemic bright spot, rose only 0.2%.

(Photo by Stephanie Keith/Getty Images)