Spending confidence is down with the loss of unemployment bonuses.
According to recently released retail profit reports from the Commerce Department, retail sales in the United States were not able to meet expectations. Since the initial pandemic shutdown in March, retail businesses large and small have been devising new strategies for safely reopening their doors to customers. By the beginning of the summer, certain sectors like restaurants, electronics stores, and clothing stores. Online shopping in particular has seen a massive boom, which is understandable given customers’ reluctance to leave the house.
However, several large sectors, most notably the automobile industry, have seen decline in sales. With local governments advising against traveling for the summer, US citizens have had less need to drive and, by extension, get tune-ups and gasoline. While retail sales did technically increase in July thanks to the aforementioned sectors, total sales did not manage to hit the mark predicted by economists.
Q2 was especially dire for the US, with consumer spending down overall by 34.6%. This, in turn, caused the US’ GDP to drop by 32.9%, which is the largest GDP drop-off since the GDP was first tracked in 1947. The value of the dollar is also down compared to several other currencies, though prices of the US Treasury are on the rise.
While economists believe that the US is due for a rebound after Q2’s poor showing, expectations have been soured by the ongoing stimulus package debate. Currently, there are approximately 28.3 million US citizens receiving some degree of unemployment benefits. When the $600 bonus to unemployment benefits expired recently, however, many lower income families have found themselves in dire financial straits. US President Donald Trump recently signed an executive order to reinstate the benefits, but with the caveats that they be reduced to $400 and funded by individual states and an emergency fund. State governments have criticized this approach, saying that the pandemic has sapped their own available funds, and that the emergency fund could only last until September. The President’s other executive order, which suspended the collection of payroll taxes until the end of the year, has not provided any substantial boost to the economy.