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US Retail Sales Show a Strong Rebound in Consumer Spending

Posted: Tuesday, October 20th, 2020

Estimated Reading Time: 2 minutes

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September US retail sales showed a strong advance. Sales increased by 1.9% when compared to the previous month’s report. However, when compared to September 2019 data, they jumped by 5.4%.

What made it possible for the US consumer to come back in such a strong shape? Moreover, how come the September 2020 data beats the data from one year ago? One explanation (the most pertinent one) comes from the fiscal stimulus delivered by Congress during the pandemic.

US Retail Sales

Fiscal Stimulus and Its Role in Boosting the US Retail Sales

When the pandemic reached the United States, millions of Americans applied for unemployment benefits. To this day, over twenty-five million people rely on such benefits in America, a staggering number for the world’s largest economy.

As states closed down fully or partially in response to the increasing number of infections, people worked remotely. Or, not at all.

Therefore, the US Congress delivered weekly checks ranging from $300 to $600. The amounts lifted income, stimulating consumption. People spent the money but also saved. A quick look at the savings rate during the pandemic shows reluctance in the face of uncertainty.

However, the savings rate dropped back in September, albeit it remains at elevated levels. It means one of two things. Either Americans exhausted other income resources or dived into savings. Or optimism prevails, and there is no need to save as much as before.

This brings into question the Congress’ dilemma moving forward. Is there a need for a second fiscal package? If yes, how big should the package be? Also, should it be released before or after the November 3rd elections?

What Did Americans Buy in September?

Cars. Americans bought cars as the automotive industry is one of the industries that benefited the most from the shift in consumer behavior. As the infection rate continues to rise, and the second wave hits America, people’s reluctance to use public transportation increased. As such, sales of used and new cars went through the roof.

Besides cars, sporting goods, books, music, discounted clothing topped the list. Americans enjoyed the last days of warm weather before winter settles, as the US retail sales show.

Because the US economy is the largest in the world, improvements there signal optimism for the rest of the world. As consumer spending sits at the heart of economic growth, strong retail sales data, as seen in September, shows a resilient consumer. Also, opportunities for growth, despite the pandemic still claiming millions of jobs throughout America.

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