|Staff Reporter |||Apr 16, 2020 07:08 PM EDT|
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Retail sales in the US in March had dropped by the sharpest rate ever recorded since the government started tracking the metric in 1992. The Commerce Department announced on Wednesday that retail sales had plunged by 8.7 percent in March, a massive decline when compared to the 0.4 percent contraction in February.
The dip has been attributed to the continued mandatory business closures imposed by several states to mitigate the spread of the coronavirus pandemic. The stay-in-place orders and travel restrictions have also greatly curbed the demand for non-essential goods, further hurting businesses.
The rate of decline recorded last month was slightly higher than the rate initially forecasted by economists, which was an average of 8 percent for March. The dim outlook for the country's retail sector is also based on the continually growing unemployment rate as millions of Americans now find themselves out of work. This has greatly reduced the purchasing power of most consumers, who are now mostly reserving their spending for essential items such as food and medicine.
More than 90 percent of US residents are now under shelter-in-place orders as the number of confirmed cases in the nation continues to climb. As of today, the country now has more than 644,000 confirmed cases with over 28,500 fatalities.
Economists have stated that the US economy is now in a free fall and is continually declining. How deep the economy will go into recession will mainly depend on when the infection rates will stabilize. Based on the current rates, economists believe that the bottom will be deep and it will take the economy months, if not years, to get back up.
Consumer spending the US accounts for about two-thirds of the country's economic activity. The recent dip in spending has all but erased the growth recorded last year, with consumer spending estimated to decline by as much as 41 percent in the second quarter of this year. The forecasts are still quite grim even taking into account the country's unprecedented $2.3 trillion fiscal package.
The slump in retail sales has affected most categories except for online sales from companies such as Amazon. E-commerce companies, particularly those offering grocery and medical deliveries have spiked in recent months as more people stock up on food and medicine through online channels.
Economists at Wells Fargo Securities pointed out that general consumer spending and retail sales will continue to decline in the coming months. However, there will be some categories that will resilient throughout the ordeal. Unfortunately, the surge in online purchases for essential items will be unable to offset the overall dip in spending in other categories.
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