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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

US retail sales slow as lack of fiscal stimulus weigh

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WASHINGTON: US retail sales increased less than expected in October and could slow further, restrained by spiraling new COVID-19 infections and declining household income as millions of unemployed Americans lose government financial support.


While other data on Tuesday showed production at factories accelerating in October, output remained well below its pre-pandemic level and the uncontrolled coronavirus outbreak could disrupt production.


The public health crisis and frail economy are major challenges confronting President-elect Joe Biden when he takes over from President Donald Trump in January. Biden on Monday urged Congress to come together and pass another pandemic relief package. This is unlikely to happen before he is sworn on January 20, putting pressure on the Federal Reserve to pump more money into the economy.


“It looks like consumer spending is increasingly turning into a headwind for this recovery from the worst economic downturn since the Great Depression,” said Chris Rupkey, chief economist at MUFG in


New York. “Fed officials are saying they might have to do more and today’s data may turn that thinking into a reality.” Retail sales rose 0.3 per cent last month after increasing 1.6 per cent in September, the Commerce Department said. They account for the goods component of consumer spending, with services such as healthcare, education, travel and hotel accommodation making up the other portion.


Sales were supported by Amazon.com’s ‘Prime Day’ event, with online receipts surging 3.1 per cent. Consumers also bought motor vehicles, though at a much slower pace than in the previous months. There were also increases in sales of electronics and appliances, as well as building materials and garden equipment. But households cut back spending on sporting goods and hobbies, clothing, furniture, drinking and dining out.


Economists had forecast retail sales would gain 0.5 per cent in October. Retail sales rose 5.7 per cent on a year-on-year basis in October. They have pulled above their February level, with the pandemic shifting demand away from services to goods. US stocks opened lower, and the dollar slipped against a basket of currencies. US Treasury prices rose. Daily new coronavirus cases have been exceeding 100,000 since early this month, pushing the number of infections in the United States above 11 million, according to a Reuters tally. Some state and local governments have imposed new restrictions on businesses. Restrictions and consumer avoidance of crowded places like bars and restaurants could undercut spending and trigger another wave of layoffs, further squeezing incomes following the loss of a government weekly unemployment subsidy.


The supplement, which was part of more than $3 trillion in government coronavirus relief, has lapsed for millions of unemployed and underemployed workers. Millions more will lose benefits next month when a government-funded programme for the self-employed, gig workers and others who do not qualify for regular state unemployment programs expires.


Another government programme providing benefits for people who have exhausted their six months of eligibility for state aid will also lapse at the end of December. Excluding automobiles, gasoline, building materials and food services, retail sales edged up 0.1 per cent after a downwardly revised 0.9 per cent increase in September. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.


They were previously estimated to have risen 1.4 per cent in September. Economists expect moderate retail sales growth for the rest of the year, which will contribute to slower economic growth after a historic rebound in gross domestic product in the third quarter. A JPMorgan survey of credit and debit cardholders showed a broad decline in spending through November 9, with big drops in states where COVID-19 is spreading most rapidly.


A separate report from the Federal Reserve on Tuesday showed manufacturing output increased 1.0 per cent last month after gaining 0.1 per cent in September. Still, factory production remains about 5 per cent below its pre-pandemic level. Last month’s increase in factory output was in line with economists’ expectations.


— Reuters


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