Retail spending in July exceeded pre-pandemic levels

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Purchases by Americans topped pre-pandemic levels last month, but new hurdles could hamper the U.S. economy as it emerges from a severe recession.
Retail sales – reflecting what households spent at gas stations, stores, restaurants and online – rose 1.2% in July, the Commerce Department said on Friday. This marked the third consecutive monthly gain as the United States struggled to reopen its economy as much as possible despite the challenges posed by the coronavirus pandemic. After accounting for seasonal factors, sales were up 1.7% from February, the month before the pandemic crippled much of the economy. Last month, consumers increased their spending on electronics and appliances, health products and restaurant meals.
But new evidence suggests households have moderated their spending this month. One factor: the expiration, on July 31, of an increased unemployment benefit. The benefit – authorized by the Cares Act passed by Congress in March – had increased the weekly income of the unemployed by $ 600 a week, and many households were spending it. Amid Congress’ deadlock on a new stimulus package, President Trump has acted to replace payments with a $ 300-a-week benefit, but it is unlikely to hit workers for weeks.
“We talk a lot about the recovery as if they had already declared the recession dead,” said Amy Crews Cutts, head of consulting firm AC Cutts & Associates. “I think we are not out of a recession, and the stops and starts that occur in state-level economic openness show a fragility of the economy.”
Many economists expect the economy to rebound this quarter after gross domestic product fell 9.5%, or 32.9% year on year, in the second quarter. Economists expect production to grow at an annual rate of 18.3% in the third quarter, according to a Wall Street Journal poll.

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