Retail sales ticked up in August from the previous month but at a slower pace after the enhanced unemployment benefits provided by the federal government ended.
US retail sales rose 0.6% in August, the Commerce Department reported Wednesday. That's below the 1% predicted by economists surveyed by Refinitv. In July, retail sales grew 0.9%, the Commerce Department said. That gain already was significantly slower than the 8.4% gain in June.
A supplemental $600 weekly unemployment insurance, which had been part of the government's first stimulus bill, ran out at the end of July. Since then, Congress has been unable to agree another boost to jobless benefits. President Trump signed an executive order to bolster benefits again, although by less money, by diverting funds from the Federal Emergency Management Agency.
Consumer spending is the biggest engine of US economic growth, and retail sales are an important component of that. The report from the Commerce Department, however, does not include spending on services — things like hair-cuts, medical care and financial services.
Some economists say continued growth in retail sales depends on future government stimulus funds and relief to people who have lost their jobs.
"A partial relapse [in retail sales] is likely over the next couple of months as people who have been receiving enhanced unemployment benefits...cut their spending," Ian Shepherdson, economist at Pantheon Macroeconomics, said in a research report Tuesday. "The income hit from the benefit cut-off is too big for people to ignore."
Some background: Retail sales slumped to a seven-year low in April as the coronavirus prompted stores across the country to shut their doors. Sales bounced back to pre-pandemic levels in July.
Although retail sales have bounced back, the spending has not gone to all retailers equally.
So far in 2020, nearly 8,000 stores have said they will permanently close, according to Coresight Research, a retail research and advisory firm. It anticipates closures will set a new annual record this year with as many as 25,000, breaking last year's record 9,302 closures tracked by the firm.