Retailers Face an Uncertain Future Without Government's Pandemic Aid
The American Rescue Plan Act (ARPA), a $1.9 trillion relief package signed into law by President Biden in March 2021, had a significant impact on consumer spending and retail sales in the U.S. Although its effects on February 2021 retail sales were more indirect, the anticipation and subsequent approval of the stimulus did influence consumer behavior and spending patterns in the following months.
Pre-Passage Impact (February 2021)
The anticipation of additional stimulus may have encouraged consumers to spend more in February 2021, as they anticipated receiving relief funds. However, the overall retail sales were influenced by other factors such as existing economic conditions, pandemic-related restrictions, and previous stimulus packages.
Post-Passage Impact (March and Beyond)
The ARPA provided direct financial benefits to many Americans, including stimulus checks and expanded unemployment benefits, which directly boosted consumer spending in the months following its enactment. This influx of funds led to a surge in retail sales as consumers had more disposable income available, contributing to a rebound in economic activity.
The long-term effects of the stimulus were noteworthy, as the scale of the stimulus contributed to overheating the economy, leading to inflation as demand exceeded supply. This inflationary pressure was a significant factor in the economic landscape of 2021 and beyond.
Retail Sales Figures
Despite the indirect impact on February 2021 retail sales, the overall retail sales growth for the group tracked by Retail Dive was 7.8% compared to February 2020, and up 23.5% online.
Several retail segments saw changes in sales during this period. Sporting and hobby sales fell 14.3%, while home goods and furniture sales decreased by 5.4%. General merchandise sales fell 8.9%, and electronics sales fell 10.8%. Interestingly, apparel was the only segment to see an uncharacteristic 7.5% rise. E-commerce sales fell 7.2% in February.
Consumer Spending Trends
Robert Frick, corporate economist at Navy Federal Credit Union, mentioned that wages need to rise for lower-paid workers to sustain the economic recovery. Despite this, consumers were willing to spend as the virus situation improved and with continued government stimulus.
NRF Chief Economist Jack Kleinhenz stated that consumers are willing to spend, and this willingness, along with the direct financial benefits provided by the ARPA, contributed to the rebound in retail sales and the economic recovery post-pandemic.
- The anticipation of additional stimulus, as part of the American Rescue Plan Act, potentially encouraged consumers to spend more in February 2021, even before the stimulus checks were received.
- In the months following the ARPA's enactment, consumers had more disposable income available, thanks to direct financial benefits like stimulus checks and expanded unemployment benefits, which boosted consumer spending.
- The surge in retail sales post-passage of ARPA was a significant contributor to the rebound in economic activity that was seen.
- The inflationary pressure resulting from the stimulus was a substantial factor in the economic landscape of 2021 and beyond, as the scale of the stimulus led to economic overheating.
- Despite indirect effects on February 2021 retail sales, overall retail sales growth for the year, compared to the same month in 2020, was 7.8% in physical stores and up 23.5% online.
- Compared to other retail segments, apparel was the only one to see an uncharacteristic 7.5% rise in sales, while sporting and hobby sales fell 14.3%, home goods and furniture sales decreased by 5.4%, general merchandise sales fell 8.9%, and electronics sales fell 10.8%.
- Experts such as Robert Frick, corporate economist at Navy Federal Credit Union, have emphasized the importance of wage increases for lower-paid workers to sustain the economic recovery.
- According to NRF Chief Economist Jack Kleinhenz, consumers are willing to spend, and this willingness, paired with the direct financial benefits provided by the ARPA, has contributed significantly to the rebound in retail sales and the post-pandemic economic recovery.
