US retail sales plummeted by a record 16.4% from March to April because business shutdowns caused by coronavirus drove buyers away, threatening the survival of stores across the country and further weighing on a sinking economy.
Friday’s Commerce Department report on retail purchases showed the sector had collapsed so quickly that sales over the past 12 months fell a crippling 21.6%. The severity of the decline is unmatched for retail figures that go back to 1992. The monthly decline in April nearly doubled the previous record decline of 8.3% – set just one month before.
“It’s like a storm coming and leveling the entire economy, and now we are trying to make it back up and running,” said Joshua Shapiro, chief US economist for consultant Maria Fiorini Ramirez.
Shapiro suggested that retail sales should recover slightly when states and regions reopen their economies. But he said overall sales would remain depressed “because there will be a large number of lost jobs that don’t return.”
The sharpest decline from March to April occurred in clothing, electronics and furniture stores. The old migration of consumers to online purchases is accelerating, with the segment posting a 8.4% increase every month. Measured from year to year, online sales jumped 21.6%.
Apart from being online, no retail categories were avoided in April. Car dealers experienced a monthly decline of 13%. Furniture stores absorb 59% risk. Electronics and equipment stores dropped more than 60%. Retailers selling building materials posted a decline of around 3%. After panicking buying in March, wholesale sales fell 13%.
Clothing store sales plummeted 79%, department stores 29%. Restaurants, some of which have begun to close permanently, have decreased by almost 30% despite an aggressive shift to food delivery and delivery orders.
For the staggered retail sector, free fall in spending again poses a big risk. Department stores such as Neiman Marcus and J. Crew have filed for bankruptcy protection. Hotels, restaurants and car dealers are in danger. Nearly $ 1 of every $ 5 spent at retailers last month goes to non-store retailers.
Retailers are being threatened not only by the closure of businesses mandated by states and localities but also by the loss of a record 36 million jobs over the past two months. Unemployed usually pulls back sharply on retail purchases.
April analysis by a group of academic economists found that a one-month closing can remove 31% of non-wholesale retailers. Four-month closure can force 65% to close.
The fall in retail spending is the main reason why the US economy is contracting. Purchases at retailers are a major component of overall consumer spending, which triggers around 70% of economic activity.
With some Americans shopping, traveling, eating or shopping normally, economists project that gross domestic product – the widest measure of economic activity – shrank in the April-June quarter at an annual rate of around 40%. That would be the deepest quarterly decline on record.
Expenditures tracked by Opportunity Opportunities indicate that consumer spending may have reached its lowest point around mid-April before starting to rise slightly, at least in the general clothing and merchandise category. But spending on transportation, restaurants, hotels and arts and entertainment remains very depressed.
Credit card purchases tracked by JPMorgan Chase found that expenses for necessities such as food, fuel, telephone services, and car repairs fell by 20% annually. Conversely, spending on “things that are not important,” such as eating out, plane tickets and personal services such as salons or yoga classes, dropped by 50% worse.