The National Retail Federation (N.R.F.) said on Monday that overall economic activity for the retail sector is not expected to return to pre-pandemic levels until late 2021, with coronavirus related economic challenges to remain even through 2023 for some in the retail industry.
"As we closed out 2020, it was an end to a whirlwind year whose challenging economic environment will almost certainly continue in 2021," said N.R.F. Chief Economist Jack Kleinhenz in a statement. "This coming year might be just as eventful as the economic recovery faces many uncertainties. Recoveries do not proceed in a straight line and prospects for volatility over the next few months are high."
In the N.R.F.'s Monthly Economic Review for January 2021, the retail trade group highlights that while retail sales for the first 11 months of 2020 were up 6.6% year-over-year, that increased spending was distributed across the industry unevenly. This type of distribution has created a winners and losers type of recovery in retail, which is set to continue as consumers continue to shop more online.
Kleinhenz believes that the second round of stimulus provided in Congress's latest economic relief package will help maintain and accelerate the industry's recovery, with the $600 direct payments and $300 weekly unemployment benefits coming at a critical time.
"We expect retail sales spending to see a boost from the new round of stimulus," Kleinhenz continued. "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. With additional funds, consumers are likely to reengage spending on non-durables goods and services."
The big question is, will consumers actually spend their stimulus checks on retail goods. Following the earlier round of $1,200 stimulus checks outlined in the first coronavirus relief bill, the national personal savings rate, which is personal savings as a percentage of disposable income, skyrocketed to a nearly 40 year high.
According to a survey conducted by the National Bureau of Economic Research, only 15% of first round stimulus recipients spent most of their $1,200 benefit, with 33% reporting that they saved it and 52% saying they used the money to pay down debt. If the money was spent, it went towards food and other consumable products, rather than big-ticket items.
Throughout the pandemic and its recession, consumers have shifted their spending away from traveling, dining out and other entertainment, freeing up money from services to goods. Stay-at-home orders have changed consumers' perspectives on their homes, leading to home improvement related markets like appliances and furniture being the key retail spending in 2020.