By Josh Mitchell and Suzanne Kapner
U.S. households appear to be tightening their spending on retail
goods and services, sapping momentum from the budding economic
The Commerce Department is set to report figures on July retail
sales Friday at 8:30 a.m. ET. Economists think retail sales --
covering spending at service stations, restaurants, stores, and
online -- rose for the third straight month after growing briskly
in May and June. But they are expecting a more modest gain this
Meanwhile, fresher data suggest retail spending softened this
month. One factor: the July 31 expiration of an enhanced
unemployment benefit. That benefit -- authorized in the Cares Act
passed by Congress in March -- had boosted jobless Americans'
weekly income by $600 a week. Amid congressional deadlock over a
new stimulus plan, President Trump has acted to replace the
payments with a $300-a-week benefit, but it isn't expected to reach
workers for weeks.
On top of that, a rise in coronavirus infections in several big
states earlier this summer prompted a new round of restrictions on
businesses and spooked many consumers back into their homes. The
prospect of schools moving teaching online this fall may also
undermine back-to-school spending.
The upshot: Consumer spending and the economy in general are on
a bit of a roller coaster as they recover from a historically
severe contraction. The economy has added millions of jobs in the
past three months, including 1.8 million in July. Initial jobless
claims, a proxy for layoffs, fell below 1 million last week for the
first time since March. But the economy still has nearly 13 million
fewer jobs than in February, and the unemployment rate remains
high, at 10.2% in July.
In the world's largest economy, consumers are paramount -- their
spending reflects more than two-thirds of economic demand. Retail
spending, which excludes costs like utilities and rent, represents
a big chunk of all consumer spending.
Expectations of a third-quarter rebound in U.S. gross domestic
product hinge largely on Americans' willingness and ability to
"Many households are now being more cautious now that enhanced
unemployment benefits have dried up," said Neil Saunders, a retail
analyst for the research firm GlobalData.
Only 36% of consumers tracked by GlobalData spent more or the
same amount on retail purchases during the first week of August as
they did the same week a year ago. That is down from 57% who did so
during the last week of June.
Foot traffic to retail stores declined six weeks ago, coinciding
with the receipt of the last batch of stimulus checks, a separate
part of the pandemic relief unrelated to the added unemployment
benefits, according to Aneta Markowska, the chief financial
economist at Jefferies Group LLC, which parses data from
location-tracking company SafeGraph Inc. Since then, foot traffic
has remained fairly steady, despite the end of the additional
Shawn Hall spent her $1,200 stimulus check as soon as she
received it in April on bills and rent. Since the pandemic started,
the 48-year-old Charlotte, N.C., resident has been earning less as
a self-employed education consultant, and she is hoping Congress
passes another round of stimulus spending to help her make ends
meet. Meanwhile, she has cut back on dining out and Starbucks
lattes, opting to make coffee at home.
The $600 weekly unemployment benefit expired July 31. That had
funneled $250 billion to families this spring, according to a Wall
Street Journal analysis. Last week, President Trump announced a
series of executive actions that, among other things, would
continue to provide an enhanced jobless benefit to Americans.
Even with that action, Ms. Markowska expects spending to decline
in August since it could take weeks to get the checks out. "Even
though the payments will be retroactive, it will be too late to
salvage August," she said.
Consumer spending has held up. One big factor is that aggregate
household income has actually grown since the pandemic began in
March, boosted by federal stimulus checks of up to $1,200 for
individuals and the enhanced unemployment benefit.
Many households have used that money to pay bills and build up
savings, with the personal savings rate soaring. As the
pandemic-related shutdowns have extended for months, consumers have
started to spend some of their money, particularly on big-ticket
items and projects like refurbishing their homes.
Business has been steady for Joff Masukawa, a self-employed
life-sciences consultant in his 50s from Washington, D.C. He bought
a 1950s ranch-style house in Flat Rock, N.C., in May so that his
mother could move out of a senior-living community. He is
renovating the house and in July bought a refrigerator, stove,
dishwasher and microwave.
Mr. Masukawa said he is still spending a bit less than he was
before the pandemic. "What I'm not buying are clothes," he said.
"I'm not buying anything going out to eat. I'm not going to bars.
The only entertainment we spend money on is really cable-internet
service and then the various streaming things."
He also suspended his gym membership and, for exercise, recently
bought the Mirror, a product that displays an exercise routine.
Write to Josh Mitchell at firstname.lastname@example.org and Suzanne
Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
August 14, 2020 05:44 ET (09:44 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.