The National Retail Federation or NRF said that conflicting economic data amid a resurgence in coronavirus cases has made it difficult to predict how steadily the U.S. economic recovery will continue.
NRF Chief Economist Jack Kleinhenz noted that based on quarterly and monthly data, the U.S. economic recovery is continuing despite the elevated COVID-19 cases. However, weekly data indicated that the pace of economic recovery may be slowing.
“Optimism about the economy and retail spending is being tested daily with the spread of the coronavirus. Big questions are looming, and we are all grappling to discern what incoming data is telling us about the health of the economy and consumers,” Kleinhenz said.
According to the NRF’s Monthly Economic Review in August, monthly indicators showed the U.S. economy improving in May and June. But more frequent data, including weekly data, showed the pace of recovery flattening by mid-July.
Some of the weekly data was developed specifically to track the economic impact of the coronavirus.
Ending two consecutive months of decline, U.S. consumer spending on goods and services rose 8.2 percent in May, as government aid, pent-up demand and an improved job market drove the public to buy again. Consumer spending increased 5.6 percent in June.
Retail sales too showed an exceptionable rebound with the reopening of the economy. The NRF’s calculation of retail sales, which excludes automobile dealers, gasoline stations and restaurants to focus on core retail, increased 4.9 percent in June seasonally adjusted from May and also rose 9.3 percent unadjusted year-over-year.
Meanwhile, the University of Michigan’s consumer sentiment reading, which stood at 72.3 in May, rose to 78.1 in June but dropped back to 73.2 in July. That was down nearly 28 points from February.
Kleinheinz noted that many of the weekly reports now suggest that the U.S. economy is moving sideways. The re-emergence of the coronavirus transmission nationally has given rise to increased uncertainty.
According to the NRF, U.S. households face a potential loss of income as the supplemental unemployment insurance benefits will expire if not renewed by Congress. Uncertainty about further fiscal support from Congress may cause consumers to shift more into saving their money and move away from spending.
Consumer spending is the most important force driving the economic recovery, but recent polling showed that consumers are concerned with the health of the economy in addition to their own health and safety, the NRF noted.
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