Another component of the economy that has experienced a V-shaped rebound is consumer spending. This is perhaps best reflected in total retail and food services sales which this summer already eclipsed the pre-COVID peak and jumped by another 1.9 percent in September, according to a report released this month by the U.S. Census Bureau. That was more than double the consensus estimate and the prior month’s gain was revised slightly higher. The core metrics looked even better compared to analyst expectations, including the critical control group sales measure which better tracks broader consumer demand trends. Also of note is that despite the solid headline numbers growth in non-store retail sales, i.e. Amazon and other online merchants, has clearly cooled recently.
This encouragingly suggests that many consumers have been quick to return to their local brick-and-mortars as the economy continues to gradually reopen. A re-worsening in the pandemic that brings back the lockdowns and other restrictions could of course reverse many of these positive developments, and incoming infection data confirm that the return of cold weather and flu season should be monitored closely going forward. For now, though, conditions remain much better than what was seen earlier in the first half of 2020 and this is supported by the latest confidence surveys. The October update to the University of Michigan’s consumer sentiment index, for instance, revealed that Americans are now the most optimistic they have been since March. Confidence is admittedly still well below pre-crisis levels but the readings continue to generally trend in the right direction and constructive signs are starting to mount. Most noteworthy is the gap between consumers’ outlooks for current and future economic conditions, which has narrowed significantly in recent months to levels often seen when exiting a recession.
Sources: Econoday, U.S. DoC, UoM, FRBSL