WASHINGTON – The stimulus legislation signed into law just after Christmas will help support the nation’s ongoing recovery from the economic fallout from the COVID-19 pandemic, National Retail Federation chief economist Jack Kleinhenz said on Monday.
“As we closed out 2020, it was an end to a whirlwind year whose challenging economic environment will almost certainly continue in 2021,” Kleinhenz said. “The coming year might be just as eventful as the economic recovery faces many uncertainties. Recoveries do not proceed in a straight line and the prospects for volatility over the next few months are high. Nonetheless, just like the old Timex watch commercials, the economy takes a licking but keeps on ticking.”
“We expect retail sales spending to see a boost from the new round of stimulus,” Kleinhenz said. “Consumers responded quickly to last spring’s stimulus checks, and distribution of the new checks will come at a critical time that will help carry 2020’s momentum into 2021.”
Legislation signed on December 27 will provide one-time $600 stimulus checks to individuals making up to $75,000 a year and extends $300 weekly checks for the unemployed for almost three months. The new aid is particularly important to low-income families and the unemployed, who have faced challenges paying day-to-day bills in recent months, Kleinhenz said.
Kleinhenz shared his views in the January issue of NRF’s Monthly Economic Review, which said economic activity will likely pick up after the winter months and into mid-year as COVID-19 vaccines allow more activities to resume. The availability of a vaccine during the first quarter – historically a soft spot in the economy every year even without a pandemic – “couldn’t be better,” he said.
Even though full recovery has yet to come, the economy has made considerable progress, Kleinhenz said. Retail sales for the first 11 months of 2020 (excluding automobile dealers, gasoline stations and restaurants) were up 6.6% over the same period in 2019 and November’s year-over-year increase of 8.8% put the holiday season on track to meet NRF’s forecast of between 3.6% and 5.2% growth, the report said. Results for the full holiday season will be known when the Census Bureau releases December’s numbers on January 15. (Preliminary data from MasterCard Spending Pulse suggested that retail sales grew 3% this holiday season, helped by an expanded holiday season and strong online sales.)
Some of the money normally spent on traveling, dining out and entertainment shifted from services to goods in 2020, especially big-ticket home-related items like appliances and furniture, the report said. Rising wealth from increasing home values and stock prices have supported additional consumer purchases of retail goods, and the new stimulus checks should encourage consumers to “reengage” on non-durable goods and services.
While consumer spending and retail sales have largely returned, results have varied among retail sectors and “economic uncertainty is very prevalent and at near-record levels,” the report said. Overall economic activity is not expected to return to pre-pandemic levels until late 2021 and employment at pre-pandemic levels is unlikely to return until well into 2022 or possibly 2023.