Economic challenges arising from the coronavirus pandemic will continue in 2021, but stimulus legislation signed into law just after Christmas will help maintain and accelerate the nation’s ongoing recovery, Jack Kleinhenz, National Retail Federation chief economist has stated.
His remarks are included in the NRF’s Monthly Economic Review.
Legislation signed December 27 that is providing 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 is particularly important to low-income families and the unemployed, who have faced challenges paying day-to-day bills in recent months, Kleinhenz pointed out.
Even though full recovery has yet to come, the economy has made considerable progress. Retail sales for the first 11 months of 2020, excluding automobile dealers, gasoline stations and restaurants, gained 6.6% over the same period in 2019, and November’s year-over-year increase of 8.8% put the holiday season on track to meet NRF’s forecast of between 3.6% and 5.2% growth, the economic review report indicated. Final results for the full holiday season will arrive on January 15 when the Census Bureau releases its December retail numbers.
Some money that normally might have been spent on travel, dining out and entertainment shifted from services to goods in 2020, especially big-ticket home-related items such as appliances and furniture, NRF maintained. Rising wealth from increasing home values and stock prices have supported additional consumer purchases of retail goods, and the new stimulus checks should encourage consumers to “reengage” on non-durable goods and services. Although consumer spending and retail sales have largely returned, results have varied among retail sectors and economic uncertainty is prevalent and at near-record levels. NRF does not expect economic activity to return to pre-pandemic levels until late 2021 and employment until well into 2022 or possibly 2023.
“As we closed out 2020, it was an end to a whirlwind year whose challenging economic environment will almost certainly continue in 2021,” Kleinhenz noted. “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. We expect retail sales spending to see a boost from the new round of stimulus. 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.”