By Harriet Torry
American shoppers boosted their buying more slowly in October,
another sign the U.S. economic recovery is losing steam as
coronavirus cases increase across the country.
Consumer spending data from private companies suggest shoppers
turned more cautious this month too as a surge in coronavirus cases
in October accelerated in November, prompting some officials to
impose new restrictions, mask mandates and other mitigation
strategies to slow its spread.
"We're going into a difficult winter," said James Sweeney, chief
economist at Credit Suisse, pointing to rising Covid-19 infections,
new local business restrictions and dimming prospects for a fresh
government relief package this year.
Slowing payroll gains and waning government assistance mean
"however you cut it we should have weaker consumer spending over
the next quarter or two than we had this summer," Mr. Sweeney
said.
The Commerce Department said Tuesday that retail sales, a
measure of purchases at stores, restaurants and online, rose a
seasonally adjusted 0.3% in October from a month earlier. That was
well below a 1.6% increase in September, and marked the smallest
monthly rise in retail sales since May, when spending rebounded
from sharp declines in the early phase of the pandemic.
While spending on vehicles, electronics and at home-improvement
stores increased last month, sales dipped in key categories like
grocery store, clothing and restaurant spending.
JPMorgan Chase & Co. said Friday its tracker of 30 million
credit and debit cardholders recorded a 7.4% decline in spending
from a year earlier in the week through Nov. 9, the weakest reading
since early September.
For much of October, the new coronavirus cases reported each day
rose faster on average than during the week prior, according to a
Wall Street Journal analysis of Johns Hopkins University data. By
the middle of the month, the average number of new cases reported
each day increased to more than 50,000. That more than tripled in
following weeks to more than 166,000 new cases reported Monday. The
U.S. has now reported more than 11.2 million confirmed infections,
Johns Hopkins data show.
"I have to spend wisely because we're in a pandemic. You want to
keep yourself healthy," said Michelle L. Busch, owner of
Washington, D.C.-based events company Event Solutions DC.
Ms. Busch's spending has mostly been focused on her business,
with occasional luxuries that include working out with a personal
trainer, subscriptions to fitness apps and buying fresh fruit and
vegetables.
The 42-year-old plans to stay home for the holidays this year
since the big gatherings she usually attends are canceled. "It kind
of makes me sad. The holidays are going to be really different,"
she said.
Online shopping continues to flourish. Retail sales increased
3.1% in October from the prior month at nonstore retailers, a
category that accounts for online merchants, according to Tuesday's
Commerce report. Retailers pushed an early start to the holiday
shopping season in October with promotional events like Amazon.com
Inc.'s Prime Day.
Walmart Inc. reported Tuesday that e-commerce sales in the U.S.
jumped 79% in the quarter ended in late October. People are making
fewer trips to Walmart stores, shifting more spending online and
stocking up when they do go to stores, the company said.
The retail giant's comparable U.S. sales, those at stores or
digital channels operating for at least 12 months, rose 6.4% -- a
slower pace than earlier in the coronavirus pandemic even as
shoppers continued to buy up food and cleaning supplies and it
pushed early holiday deals.
Retail sales can be volatile from month to month and subject to
large revisions. Other data -- which include declining jobless
claims in the week ended Nov. 7 and rising employment and
manufacturing and service activity in October -- point to an
economy that continues to recover from sharp drops in output
earlier this year.
The Federal Reserve on Tuesday said its index of industrial
production -- a measure of output at factories, mines and utilities
-- rose a seasonally adjusted 1.1% in October. Output remains 5.6%
below where it was in February, before the coronavirus pandemic
hit, the Fed said.
Some sectors of the economy are profiting from low interest
rates and consumer demand for improved residential and workspaces,
as the pandemic keeps people working and studying at home.
The housing market, home-improvement businesses and online
retailers have been particularly robust, reflecting the broader
economy's K-shaped recovery that has seen some businesses to thrive
and grow, while others struggle or fail.
Home Depot Inc. reported strong sales growth in its latest
quarter as the retailer continues to serve people spending more
time on home-improvement projects during the pandemic.
Home-builder confidence in the U.S. increased in November for
the seventh straight month, hitting a fresh record high, according
to a measure from the National Association of Home Builders
released Tuesday.
Still, other data indicate the broader economic recovery remains
on fragile ground as coronavirus cases rise. Consumer sentiment
fell in early November, according to the University of Michigan's
preliminary index for the month. Americans' outlook on the economy
soured in the two weeks straddling the national elections, as
Republicans grew more pessimistic and Democrats worried about the
rise in coronavirus infections.
Federal Reserve Chairman Jerome Powell last week said the U.S.
rebound, though faster and stronger than officials had expected,
has slowed "quite a bit" in recent months.
"We do see the economy continuing on a solid path of recovery,
but the main risk we see to that is the further spread of disease
here in the United States," he said Thursday.
Many retailers plan to close stores on Thanksgiving and have
been offering earlier Black Friday deals online to reduce crowds --
posing potential challenges during the key holiday season for an
economy that leans heavily on shoppers' willingness to consume.
Still, Jonathan Silver, chief executive of Affinity Solutions, a
firm that aggregates consumer credit- and debit-card spending data,
said he expects decent retail sales this holiday season as
consumers who are saving on services like travel spend those
dollars on other things.
Matt Grossman, Sarah Nassauer, Jennifer Calfas and David
Harrison contributed to this article.
Write to Harriet Torry at harriet.torry@wsj.com
(END) Dow Jones Newswires
November 17, 2020 13:44 ET (18:44 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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