The lack of a second COVID-19 relief package appears to be taking a toll on U.S. retail sales.
On Tuesday, Reuters reported that retail sales increased less than expected in October -- just 0.3 percent, according to the Commerce Department. Reuters said sales could slow even further due to the impact of the second wave of COVID-19 infections and unemployed Americans’ loss of federal aid.
Earlier this week, President-elect Joe Biden called on Congress to pass another COVID-19 relief package. However, experts say that’s unlikely to happen before the end of the year.
“It looks like consumer spending is increasingly turning into a headwind for this recovery from the worst economic downturn since the Great Depression,” Chris Rupkey, chief economist at MUFG in New York, told Reuters. “Fed officials are saying they might have to do more and today’s data may turn that thinking into a reality.”
Loss of aid and rise in cases
A large number of unemployed and underemployed workers are set to lose benefits in December, when the six-month period of eligibility for government funded programs ends.
Additionally, the rise in daily new COVID-19 cases has prompted many businesses to impose new restrictions, and many consumers may be reverting back to a place of caution in light of the surge in infections.
Economists expect “moderate retail sales growth” for the rest of 2020, according to Reuters.
“The reopening of businesses has been the key to keeping income gains up, but the resurgence of the virus is putting that into question,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. “Manufacturing can only hold up if households keep buying and they need income to do that.”