American consumer resilient
The consumer is important
In the month of April, more than 20 million Americans lost their jobs. In the same month, retail sales fell 14.7 percent compared to March. Since consumers in the United States account for no less than 70 percent of GNP, there were great concerns about the extent to which the economy could recover. Economic recovery without an ambitious issuing consumer is unthinkable.
Well, this week the Department of Commerce reported store sales for May. The sales turned out to have increased no less than 17.7 percent compared to the month before. Economists had expected an increase of only 8.2 percent. The resilience of American consumers exceeded even the most optimistic expectations. So it turns out that Americans did not just sit at home in May while speculating on the stock market with their government support money.
Across the board
Because sales increased across the board. Online sales continued to increase, albeit at a slower pace. What particularly caught the eye was the doubling of spending on furniture and sporting goods and a tripling of spending on clothing. The hotel and catering industry did not fare as well. But that will come as no surprise. This sector is clearly a loser in this crisis. The gradual reopening of the economy after the lockdowns caused by the pandemic has thus had its effect. It elicited a positive tweet from the president: “Wow! May retail sales show the biggest one-month increase of ALL TIME. Far bigger than projected”. And he was right about that.
Reopening the economy
But the American economy isn’t there yet. For example, the spending level is still 6.1 percent lower than a year ago. The reopening of the economy and government support in the form of direct benefits to citizens, extended unemployment benefits, and the Paycheck Protection Program have kept the consumption pattern going. A complete reopening of the U.S. economy later this summer could continue this recovery. Back to pre-Covid 19 levels?
End of generous support programs
However, it is very doubtful whether this will happen at such a fast pace. Congress is currently refusing to extend the generous benefits beyond July. It is believed that this financial support will remove the incentive to go back to work. And if this support disappears at the end of July, the revival in consumption could also be extinguished. Everything will then depend on the United States recovering economically on its own. For the time being, the rebound of the macroeconomic figures in the United States is spectacular. Unemployment is falling, purchasing managers are regaining confidence and the industry is also showing some recovery.
Still too early to rejoice
The Federal Reserve agrees. But the central bank also keeps its doubts about the speed with which the economy can return to old levels. The Federal Reserve indicated to expect that interest rates will have to remain low for years to come. The resurgence of the virus in some southern states raises concerns about possible new lockdowns. Yes, the economy is moving in the right direction again, but it’s still too early to crow. As much as the White House resident would like.