Sales at U.S. retailers sank a record 16.4% in April (economists polled by MarketWatch expected a 12.5% plunge) after the coronavirus pandemic shuttered much of the economy, cost millions of jobs and spawned an unprecedented slump in consumer spending. Retail sales tumbled in every category except online shopping, the government said Friday. Sales also sank by a revised 8.3% in March, easily marking the worst back-to-back declines in modern American history.
Receipts at auto dealers fell more than 12% as sales fell to the lowest level in decades. Gas stations also saw a 29% plunge in sales as oil prices slumped and stay-at-home orders kept Americans off the roads. Even if those two categories are set aside, the damage was almost unfathomable. Sales excluding gas and autos — two of the largest sources of retail spending — sales sank 16.2%. Grocery stores, which benefited from consumer stockpiling in March, still posted a 13% decline in sales.
The worst hit? Sales dropped 79% at clothing stores, 60% at electronics stores, 59% at furniture stores, 30% at bars and restaurants and 15% at pharmacies.
The exception to the rule was most likely due to online shopping availability. Home centers such as Home Depot and Lowe’s, which remained open, only recorded a 3.5% decline, have very accessible online shopping sites and then there’s also the desire to do home improvement projects while observing shelter-in-place orders. The only real retail winners were internet stores such as Amazon.com and large chains like Walmart, again, thanks to their big online presence. Overall receipts at internet retailers jumped 8.4%. Those companies have been hiring thousands of workers to handle a flood of online orders from customers staying at home or too worried to venture out.
It’s worth noting that the government’s effort to track sales was hindered by so many stores being closed. But even if its sales estimate is somewhat off, there’s no doubt that retailers just suffered their worst month since the government first began keeping track in 1967. Plunging retail sales came as no surprise, but the depth of the drop was still shocking. It was four times as large as the biggest decline during the 2007-09 2007-09 recession. The huge pullback in spending indicates the economy has already entered a deep recession. Economists polled by MarketWatch forecast a nearly 28% decline in second-quarter gross domestic product, with some even suggesting a decline of 40% or more.
How long a downturn lasts is still an open question. Many states are trying to open their economies, but they are moving slowly to avoid further outbreaks of COVID-19 cases. What may likely help is an infusion of trillions in dollars of federal aid to help the unemployed and keep businesses afloat. With states either already starting to reopen their economies, albeit at differing speeds, or at the least planning for such a move, retail sales should begin to stabilize and rebound in the months ahead,” said senior economist Andrew Grantham of CIBC Capital Markets. Yet he cautioned that the rebound will be much slower than the slump in spending.
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