Sales Show an Increase But Disappoint Economists

Ever since retail businesses started reopening in May and June, there has been a slight increase in retail purchases, excluding items like cars, gas, and building materials. Sales were initially projected to have risen by about 1.4% in July but were later revised to 0.9%. Economists were hopeful for a continued upward trend in August, and while preliminary data suggests an increase, the sales numbers have not met expectations.

According to the latest data from the US Department of Commerce, retail sales in August fell short of the anticipated 1% rise, coming in at only a 0.5% increase, which goes up to 0.6% if gasoline sales are included. The slowdown in retail sales is believed to be attributed to two main factors: rising unemployment and decreasing income.

Currently, around 29.6 million Americans are receiving unemployment benefits due to job losses or reduced working hours caused by the pandemic. The $600 increase in benefits that was in place in July was reduced, resulting in a significant income loss for those on unemployment. The $300 increase currently in effect has reached far fewer individuals, as some states struggle to fund the increase without federal assistance. Moreover, the $300 increase is set to expire soon.

There is mounting pressure on the US government to pass new stimulus measures, but discussions have been at a standstill for several weeks. If an agreement is not reached soon, there is a risk that retail sales could decline further in the upcoming months.