On Wednesday, the Commerce Department revealed that U.S. retail sales dropped by a historic percentage in March as a result of the state-mandated shutdowns, a devastating report that sent stocks plunging.
“U.S. retail sales suffered a record drop in March as mandatory business closures to control the spread of the novel coronavirus outbreak depressed demand for a range of goods, setting up consumer spending for its worst decline in decades,” CNBC reported Wednesday. “The Commerce Department on Wednesday said retail sales plunged 8.7% in March, the biggest decline since the government started tracking the series in 1992, after falling by a revised 0.4% in February. According to a Reuters survey of economists, retail sales were forecast to have fallen 8.0% last month.”
The outlet notes that the blow to sales in most retail categories caused by the social distancing mandates “far outweighed” the surge in online sales for businesses like Amazon and any gains in sales for businesses deemed by officials to be “essential,” like grocery stores and pharmacies. Spending on clothing dropped by over 50% in March, while spending on cars and car parts declined by more than 25% and gas sales fell 17%.
Emphasizing that the decline in retail sales was “by far the largest in the nearly three decades the government has tracked the data,” The New York Times notes that the “bleak figure doesn’t capture the full impact of the sudden economic freeze on the retail industry,” as most states did not shut down “nonessential” businesses until the end of month and even early April, suggesting this month could be far worse.
Forrester Research retail analyst Sucharita Kodali described the decline as “pretty catastrophic” and predicted that April “may be one of the worst months ever,” the Times reports.
Another expert, Loyola Marymount University in Los Angeles’s Sung Won Sohn, put the situation in even more stark terms. “The economy is almost in free fall,” the business economics professor told CNBC. “We will see the bottom when the coronavirus infection rates stabilize. It’s going to be a pretty deep bottom from which to come up.”
CNBC reports that economists see “no respite” for consumer spending in the second quarter (which ends in June), citing “estimates as low as a 41% rate of decline.” That economy-devastating drop comes despite Congress passing the largest-in-history $2.3 trillion economic relief package.
The prospect of “deferred” demand, one economist told the Times, does provide some hope of a resurgence in some areas after social distancing measures are eased. “Pent-up demand is what drives recoveries, and the good news there is we will come out of this with some degree of pent-up demand,” Morgan Stanley’s Ellen Zentner told the paper, though she stressed that a prospective rebound has “a lot of caveats.”
In just three weeks after much of the country went on lockdown, 17 million Americans filed unemployment claims. In the first week, 3.3 million Americans filed claims, dwarfing the previous historic high of 695,000 set in 1982. The next week, 6.8 million more Americans filed for unemployment. In the third week, another 6.6 million jobless claims were filed.