Economic Report: Retail sales plunge a record 8.7% in March as coronavirus crisis freezes U.S. economy
The numbers: The onset of the coronavius pandemic triggered a record 8.7% slump sales at U.S. retailers in March as large swaths of the economy shut down — and there’s no light at the end of the tunnel.
Sales fell for the second month in a row in what’s likely to be a prolonged period of agony for an industry that still relies heavily on foot traffic and customers bunched together when they shop.
It’s unclear when states will allow stores to fully reopen, and even then, there’s no guarantee Americans will return to them in great numbers. Many customers, particularly older ones more vulnerable to the virus, are likely to continue practicing social distancing.
Fewer people are buying cars with millions of Americans losing their jobs and millions more worrying about their next paycheck. Americans also drove less as an economic shutdown spread across the country, exacerbating already steep price declines caused by a global price war that has cut the cost of crude oil by two-thirds in just a few months.
Sales fell a smaller but still crushing 3.1% excluding those categories, but the damage was still unprecedented. Receipts plunged 50% at clothing stores, 26.5% at restaurants and 20% at department stores.
Many restaurants are trying to survive by offering drive-thru, delivery or takeout options, but that hasn’t been enough to prevent a steep dropoff in sales.
Some stores such as grocers and Internet retailers actually saw a big surge in sales as many people rushed to stock up on essential goods such as pasta, jam, flour and toilet paper or to order online to avoid going out. Grocery sales leaped 27% while Internet receipts rose 3.1%.
Large sellers such as Amazon AMZN,
and Walmart WMT,
have performed strongly with the sudden shift to internet sales. Both companies said they planned to hire tens of thousands of additional workers to handle the extra demand.
Big picture: Most retailers face a very uncertain future, but one thing is quite clear: The long and ongoing shift to an internet-based business model will accelerate.
Traditional brick-and-mortar retailers were late to the online game and have been losing ground for years to rivals such as Amazon. Without a strong internet presence, retailers struggling with the pandemic are unlikely to survive in the long run.
What they are saying? “The slump in March retail sales was historic, but not unexpected given current circumstances,” said senior economist Andrew Grantham of CIBC.
“Clear signs of panic buying of necessities and the fact that lockdowns were introduced only around the middle of the month means that far worse is to come in April and the second quarter more generally,” said senior U.S. economist Michael Pearce of Capital Economics.
Market reaction: Limited. Economists polled by MarketWatch had expected a 7.1% plunge in retail sales. The Dow Jones Industrial Average DJIA,
and S&P 500 SPX,
were set to decline in Wednesday trades.
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