By Amara Omeokwe
U.S. shoppers likely increased spending at retailers in April,
as the recovery continued to build strength, though at a slower
pace from earlier in the spring when stimulus money arrived at most
households.
Economists expect a Commerce Department report to be released
Friday will show that retail sales -- a measure of purchases at
stores, at restaurants and online -- increased by 0.8% in April.
That would represent a marked slowdown from the 9.8% advance in
March.
The March surge in retail spending came as the government
distributed hundreds of billions in direct cash payments to
households. That was similar to a large jump in retail sales during
January, following a separate round of direct payments authorized
by Congress at the end of 2020.
The stimulus checks "burned a hole through consumers' pockets in
those months and contributed to big, big surges" in retail sales,
said Tim Quinlan, senior economist at Wells Fargo. "The immediate
sugar high from the stimulus could be wearing off."
Economists expect pent-up demand after months of government
restrictions on businesses and activity, along with large
stockpiles of savings for some households, will drive robust
consumer spending in coming months, particularly as establishments
in the services sector are allowed to more fully operate.
There are positive signs for the economy as the U.S. moves
towards a full reopening. Claims for unemployment benefits have
continued a downward trajectory to pandemic lows. State and local
governments have further eased restrictions on businesses as
coronavirus vaccines circulate and the number of virus cases
recedes. The Centers for Disease Control and Prevention on Thursday
said fully vaccinated people generally don't need to wear a mask or
socially distance during any indoor or outdoor activities.
Bernard Flynn, owner of Trident Booksellers & Cafe in
Boston, said a pick-up in business that he started to see in Mach
has continued. Sales at the store fell 50% in 2020, earlier in the
pandemic, compared to 2019, Mr. Flynn said. Now, sales are off
about 25%, he said.
Mr. Flynn said he has noticed a pick-up in visitors who are
travelers staying in nearby hotels, along with other shoppers who
are eager to be out and about.
"People are just so happy to go buy something. We see a lot of
that: People just delighted to be browsing in a bookstore," he
said.
Mr. Quinlan, of Wells Fargo, said spending should increasingly
shift away from goods -- which consumers flocked to during the
pandemic -- and toward services as people are able to spend more
time outside the home.
"All of that leads to services spending coming back online in a
really big way," he said.
A tracker of credit- and debit-card spending from Bank of
America showed that spending at department stores fell a seasonally
adjusted 28% in April from March, while outlays on clothing and
furniture also fell. Spending at restaurants and lodging jumped,
however, as did outlays on airlines, which were up 23%.
Retail sales, excluding motor vehicles and gas stations, were up
43% in April, compared with the same month in 2020, when parts of
the economy were shut down due to the pandemic, according to
Affinity Solutions, a data firm that tracks credit- and debit-card
spending.
Sales at restaurants and bars in April more than doubled over
the year, Affinity's data show. Compared with 2019 levels, the
number of reopened U.S. restaurants has daily hovered above 80%
since late April, according to data from OpenTable, the reservation
platform.
The economy's recovery continues to be uneven, however. Hiring
unexpectedly slowed last month. Consumer prices also jumped,
raising concerns that inflation may accelerate faster than the
Federal Reserve anticipates.
"Inflation is a big concern. As we know, as prices go up, that's
going to really erode consumers' purchasing power," said Lindsey
Piegza, chief economist at Stifel.
Fed officials have said the surge in prices is likely temporary
and that the central bank has tools to combat inflation should it
rise too much.
Meanwhile, they have signaled their easy-money policies,
including maintaining low interest rates, will remain in place
until the labor market is more fully healed.
"The Fed can't keep rates low and continue to stimulate growth
-- and raise rates to combat persistently high inflation," Ms.
Piegza said. That potentially causes a policy conundrum for the
Fed, she said.
Meanwhile, some employers have said they are struggling to hire
workers as business picks up.
Mr. Flynn, the Boston business owner, said he is adding workers
in anticipation of further relaxing of government mandates. He said
he recently gave his kitchen staff raises and lifted his starting
wage by $1 to $16 an hour to attract new workers. Since doing so,
he has been able to bring on several new staff, he said.
"We're hiring now, planning on restrictions being lifted," he
said. "As soon as they eliminate restrictions, we're going to be
doing a lot of business. I think the pent-up demand is there," he
said.
Write to Amara Omeokwe at amara.omeokwe@wsj.com
(END) Dow Jones Newswires
May 14, 2021 05:44 ET (09:44 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.