COVID-19 hits latest retail sales data
Released each month by the U.S. Department of Commerce, the Retail Sales Report is a broad-based measure that tracks sales across 13 retail industry sectors. It consists of receipts from stores and merchants incorporating all in-store, catalogue and internet sales. The monthly Retail Sales Report conveys the latest trend in consumer spending – which accounts for more than two-thirds of America’s economic growth.
In 2019, retail sales increased by a robust 3.6% from the prior year and was capped off by a highly successful November-December retail holiday shopping season. This year, America’s retail industry was set for another banner year. Fueled by a strong economy, record low unemployment, rising wages and high consumer confidence, retailers were optimistic on their future outlook. The National Retail Federation projected retail sales to grow between 3.5-4.1% in 2020.
For retailers, 2020 began at a vigorous pace. In January and February, sales growth over the prior 12 months surged by 5% and 4.6%, respectively. But then the COVID-19 virus hit. The global pandemic – along with the government-imposed closures and restrictions meant to limit its fallout – has exacted a brutal toll on the retail industry. In March, monthly retail sales growth declined by 8.3%. Over the prior 12 months, sales fell by 5.7%.
On Friday, the April Retail Sales Report confirmed what many had expected – that the discouraging March retail sales data was just the tip of the iceberg. In April, retail sales plummeted by 16.4% from March – the biggest monthly decline in recorded history since 1992. Over the prior 12 months, retail sales fell by a massive 21.6%.
Of the 13 retail sectors tracked by the Department of Commerce, only one reported sales growth in the month of April. To no surprise, Nonstore Retailers – which consists primarily of on-line retailers – saw its monthly sales receipts jump by 8.4%.
The largest decline was in Clothing & Clothing Accessories Stores, which experienced a monthly sales drop of 78.8%. Rounding out the Top 5 were Electronics & Appliance Stores (-60.6%), Furniture & Home Furnishings Stores (-58.7%), Sporting Goods, Hobby, Musical Instruments & Book Stores (-38%) and Food Service & Drinking Places (-29.5%).
Though designed to contain the spread of the COVID-19 virus, government-mandated closures and restrictions are having a punishing impact on America’s retailers. According to Coresight Research, 630,000 retail outlet stores across the nation have been forced to close. Moreover, this pain is also being transferred to retail store employees, which historically account for roughly 20% of our nation’s labor force.
Since February, the American economy has lost a staggering 21.4 million jobs. More than 8 million, or 37.7%, of this job loss has come from the retail sector. Unfortunately, the longer these closures and restrictions last, the greater the chance these retail stores and jobs will never return.
Mark M. Grywacheski, Investment Advisor
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Quad Cities Investment Group, LLC is a registered investment advisor with the U.S. Securities Exchange Commission.
