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Retailing losses hit wider economy hard

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NEW YORK — U.S. retail sales continued to endure more record declines as the novel coronavirus pandemic kept Americans at home, putting the economy on track for its biggest contraction in the second quarter since the Great Depression.

Retail sales in the United States are expected to fall 5.1% this year, according to the data and analytics firm GlobalData, which said the projected decline will amount to more than $200 billion.

That will be a bigger drop than any other country in terms of total value, and as a percentage it will be worse than all but 10 other major countries.

“The U.S. will perform worse than a number of other countries that have also been significantly affected by COVID-19, including the U.K. and Germany, due to the huge number of job losses caused by the virus,” said GlobalData retail analyst Emily Salter. “But it will fare better than Spain, France and Italy, as the U.S. has not enforced a full lockdown. The U.S. retail market will perform slightly worse than neighbor Canada (down 4.5%) which has also not entered a full lockdown.”

Salter added that while restrictions are starting to lift in certain states, GlobalData expects that many stores will remain closed and footfall will be severely limited through to the end of May. Nonfood spend should start to recover in June, but normal spending patterns will not return until at least October. And even then many consumers will not be able to resume their normal shopping habits because of the high unemployment rate caused by the economic restrictions currently in place.

“The 5.1% drop in the market in 2020 hides contrasting fates of different sectors, with sales of food and grocery and health products increasing as consumers stockpile goods and prioritize good hygiene, as well as the stay-at-home orders leading to a shift to grocery spend from food on the go, restaurants and cafes,” Salter said.

Elsewhere, National Retail Federation chief economist Jack Kleinhenz predicted the rebound in retail sales is likely to be gradual, and will vary by location.“Getting back to work or shopping in a pre-virus manner is difficult to predict at this time, with households likely to tiptoe back in rather than making an immediate return to the lives they experienced before,” Kleinhenz said. “As states begin to slowly reopen, and assuming the coronavirus does not come back, the economy should begin a process of gradual recovery. My overall impression is that the recovery will have fits and starts among states, regions and cities depending on the severity of the pandemic in their localities.”

Kleinhenz’s remarks came in the May issue of NRF’s Monthly Economic Review, which said that the pandemic has “wreaked havoc on the U.S. and global economies” and that it could “take several months to assess the full consequences and project a path forward.”

He added that consumers “can expect a V-shaped recovery as the economy reopens.”

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