Much has been made over the amount of money consumers will (or should) receive if a second stimulus bill passes, but if the present $900 million Covid-19 relief package stands, the National Retail Federation (NRF) believes it will help to fuel the retail industry’s recovery this year.
“We expect retail sales spending to see a boost from the new round of stimulus,” NRF chief economist Jack Kleinhenz said in a statement. “Consumers responded quickly to last spring’s stimulus checks, and distribution of the new checks will come at a critical time that will help carry 2020’s momentum into 2021.”
Legislation signed Dec. 27 would provide one-time $600 stimulus checks to individuals making up to $75,000 a year and extends $300 weekly checks for the unemployed for almost three months. Married couples earning up to a collective $150,000 would receive $1,200.
“As we closed out 2020, it was an end to a whirlwind year whose challenging economic environment will almost certainly continue in 2021,” Kleinhenz added. “The coming year might be just as eventful as the economic recovery faces many uncertainties. Recoveries do not proceed in a straight line and the prospects for volatility over the next few months are high. Nonetheless, just like the old Timex watch commercials, the economy takes a licking but keeps on ticking.”
The new aid is particularly important to low-income families and the unemployed, who have faced challenges paying day-to-day bills in October and November as government funds ran dry, Kleinhenz said. He pointed to data from the U.S. Census Bureau’s Household Pulse Survey, which notes that in eight states, at least 40 percent of adults live in households where it has been difficult to pay for usual expenses during the pandemic.
Kleinhenz’s remarks came in the January issue of NRF’s Monthly Economic Review, which noted that as has been the case for most of 2020, the outlook for consumer spending and any momentum going into 2021 depends on the health risks from Covid-19. The availability of a vaccine during the first quarter—historically a soft spot for consumer spending even without a pandemic—“couldn’t be better,” he said.
NRF calculates that retail sales for the first 11 months of 2020 (excluding auto dealers, gas stations and restaurants) were up 6.6 percent over the same period in 2019, with November’s year-over-year increase of 8.8 percent putting the holiday season on track to meet its previous forecast of between 3.6 percent and 5.2 percent growth. This growth would come even if December numbers experienced a “modest decline,” the report said.
Unfortunately, apparel still doesn’t appear to have made any significant rebound. While the NRF totals pointed to a 19.2 percent year-over-year decline for brick-and-mortar apparel retailers in its November data, the trade group highlights big-ticket items in housing-related categories such as appliances and furniture as the key spending drivers.
“Rising wealth from increasing home values and stock prices also supported additional consumer purchases of these retail goods,” Kleinhenz said in the report.
Retail’s full holiday results will be known when the Census Bureau releases December’s numbers on Jan. 15. Unlike NRF’s data, the Census Bureau includes totals spent at auto dealers, gas stations and restaurants.
Both the NRF and the American Apparel and Footwear Association (AAFA) were vocal in their calls for a second stimulus package, with the latter specifically highlighting the need for more money to be funneled into the Paycheck Protection Program (PPP). Under the $900 million stimulus package, $284 billion has been set aside towards forgivable small-business loans under the PPP.
The PPP was originally established in the CARES Act this spring. In all, nearly 5 million firms received approximately $525 billion in loans through the program, which has faced criticism for awarding funds to large or ineligible recipients.
Small businesses with less than 300 employees that took a PPP loan and saw their revenues fall by 25 percent will be eligible for a second loan. The maximum amount for a second draw will be $2 million.
Second stimulus likely to stay at $600
After months of back and forth between lawmakers in Congress on the provisions of the bill, the U.S. House of Representatives voted on Dec. 28 to raise the stimulus check amount from $600 per person to $2,000 after President Trump called for the increase. But opposition in the GOP-led Senate has prevented Congress from passing this version of the bill thus far. Trump’s $2,000 proposal received bipartisan support in the form of House Speaker Nancy Pelosi (D-Calif.) and Sen. Bernie Sanders (I-Vt.).
The future of the $2,000 checks appears in doubt, as Senate Majority Leader Mitch McConnell (R-Ky.) blocked attempts to vote on the check increase approved by the House. McConnell later resurrected the higher payments in a new bill that includes the repeal of Section 230, a provision which shields social media companies from lawsuits.
The second stimulus pales in comparison to the $2.2 trillion emergency aid bill Congress passed in March when the pandemic had rapidly spread worldwide. $250 billion had been set aside for direct payments of $1,200 to individuals and $500 per child under the age of 17, pending adjusted gross income thresholds. But that period was more urgent for businesses, particularly retailers that had temporarily closed stores, and announced layoffs and furloughs with an uncertain future ahead.
Despite the boost from the second round of stimulus checks, whatever the end total may be, the NRF doesn’t expect economic activity to return to pre-pandemic levels until late 2021, while employment at those levels are unlikely to return until well into 2022 and possibly 2023.
“The pace of the economic recovery is expected to pick up after the winter months and into mid-year, and it is likely that we will see a reacceleration of gross domestic product and jobs leaning into a meaningful economic recovery,” Kleinhenz said.
With that in mind, NRF still thinks more stimulus beyond the second round of checks is needed in order to speed up employment.