US jobless to haunt recovery hopes
Economists expect consumer spending, which accounts for more than two-thirds of US economic activity, declined at as much as a 35% annualised rate in the April-June quarter.
US retail sales rose more than expected in June as consumers bought big-ticket items like motor vehicles and dined out, but a resurgence in new Covid-19 cases is chipping at the budding recovery, keeping 32 million Americans on unemployment benefits.
Economists attributed the second straight monthly increase in retail sales reported by the Commerce Department to the government’s additional weekly $600 (€525) cheques for the unemployed, a benefit that is set to end on July 31.
The expiration of the programme will leave millions of gig workers and the self-employed among others, who do not qualify for regular state unemployment insurance, without an income.
Economists warned this would undercut consumer spending and the overall economy at a time when new cases of the coronavirus are sky-rocketing, especially in the densely populated South and West, and forcing some authorities in these regions to either close businesses again or pause reopenings.
“The road ahead for the consumer looks a little foggy and uncertain to say the least,” said Chris Rupkey, chief economist at MUFG in New York.
“July spending faces the headwinds of states closing back down due to the second wave of the coronavirus. August spending is in doubt because those extra $600 a week unemployment checks stop at the end of July,” he said.
Retail sales rose 7.5% last month after jumping 18.2% in May, which was the biggest gain since the government started tracking the series in 1992.
Retail sales have rebounded as businesses resumed operations after being shuttered in mid-March in an effort to slow the spread of the respiratory illness.
Retail sales in June were driven by an 8.2% increase in receipts at car dealerships.
Consumers stepped up spending at furniture, clothing, electronics and appliance, hobby, musical instrument and book stores.
Receipts at restaurants and bars shot up 20%.
But online and mail-order retail sales fell 2.4%.
Sales also fell at building material and grocery stores.
The rebound in core retail sales did not change expectations consumer spending collapsed in the second quarter.
It, however, set spending on a higher growth path for the third quarter.
Economists expect consumer spending, which accounts for more than two-thirds of US economic activity, declined at as much as a 35% annualised rate in the April-June quarter.
That could result in GDP falling at around a 31% pace in that period.
