By Alan Wolf, YSN
The National Retail Federation (NRF), the world’s largest retail trade association, said consumer spending and the economic recovery bodes well for the upcoming holiday selling season, but added several caveats to its forecast.
According to NRF chief economist Jack Kleinhenz, consumer spending has recovered from the coronavirus pandemic more quickly than expected, and the re-opening of the economy over the past several months has created momentum that should carry through the fourth quarter.
However, there remain several “wildcard puzzle pieces” that could derail holiday sales, including policy surprises, the election and a resurgent virus.
“I am cautiously optimistic about the fourth quarter,” Kleinhenz said. “The test is whether consumer spending will be sustained,” with uncertainty primarily pivoting on COVID-19 infection rates.
Writing in the October installment of the NRF’s Monthly Economic Review, the economist said consumer spending has seen a clear V-shaped recovery thanks in part to $1,200 stimulus checks issued this spring and enhanced benefits for the unemployed. But both government programs have ended, only about half of the 22.2 million jobs lost in March and April have been replaced, and full economic recovery is not likely before 2022.
If there should be a second wave of COVID-19 and Congress fails to provide new fiscal support, there could be an “economic speedbump” resulting in slower spending growth or even a contraction in spending, Kleinhenz said.
In a separate statement, NRF president/CEO Matthew Shay expressed concern over President Trump’s initial statement yesterday calling for a delay in negotiating new pandemic recovery legislation until after the November 3 election. “The pandemic isn’t over,” he said, “and neither is the economic crisis it has created. There are many families still struggling to make ends meet and businesses facing obstacles to putting workers back on the payroll. We need a vaccine to ensure our personal health. And we need further stimulus to ensure we can fix an ailing economy, bring people back to work and spur growth in communities large and small.”
The president had since softened his stance on resuming discussions between House Majority Leader Nancy Pelosi and Treasury Secretary Steve Mnuchin on an economic relief package.
Regardless, Kleinhenz believes there is “solid evidence that signals a better-than-expected outcome” through the just-ended third quarter, as retail spending and housing have both recovered strongly, and home sales, spurred by low interest rates, are boosting business for furniture, appliance and home improvement retailers.