Only halfway in, 2020 feels, of course, like a decade’s been packed into six months.
And to get a sense of where we are headed for the remainder of the year, one needs to look only slightly over one’s shoulder.
The signs are a bit ominous for the U.S. consumer — and by extension, retailers.
The High-Level View
At a high level, late last month, the trade group known as the Business Roundtable — comprised of the CEOs of the biggest companies in the U.S. — released its second-quarter report.
The impact of the coronavirus, they said, will likely stretch through at least 2021. But as reported by CNBC, nearly a third of executives expect the effects to extend beyond 2021.
The Business Roundtable’s CEO Economic Outlook Survey — which in part measures plans for capital spending and hiring through the next six months — fell to 34.3, according to CNBC. That’s the lowest reading since the second quarter of 2009. You may recall, of course, that we were in a recession, too, back then. This time around, we entered a recession, officially, in February.
And: The muted sentiment for hiring and spending, of course, comes against a backdrop where the latest figures show the unemployment rate has topped 11 percent. If caution rules the day, then filling payrolls back up will take a while, and we would see a U shaped recovery, dragging on a bit.
Fraying Safety Net?
Then again, time is of the essence. Absent some additional action by lawmakers, the extra money that has been coming in — $600 a week — as part of the $2.2 trillion CARES Act, is phasing out at the end of this month.
In the latest jobs report, the U.S. economy added 4.8 million jobs in June, per the Labor Department. Drilling down a bit, about 2.1 million jobs were added in the leisure and hospitality industry, with another 1.5 million positions in dining and drinking enterprises. Retail added a bit more than 700,000 jobs.
Staying In Place, Still
There will be at least some headwinds in place, we note, for travel and leisure, because, for example, the U.K. has put the U.S. on its “travel ban” list due to rising coronavirus cases. The pinch runs both ways. Roughly 14 million visitors come to the U.S. from Western Europe annually, per Statista. Forbes noted that, according to the European Union Tourism Trends Report, visitors from the U.S. made up just about half of total hotel nights in the E.U. Banning travel will crimp airline, hotel and tourism spending.
As for dining, though states have been reopening (or, depending on where you look, reopening and revamping or pulling back on reopening), PYMNTS research had noted that even before the pandemic, dining habits had already shifted, with 35.3 percent reporting dining less at quick-service restaurants (QSRs) and 35.9 percent going to sit-down restaurants less often than they had before the outbreak began. Other polls show that roughly 46 percent of consumers see themselves dining out less in a post-pandemic world.
All of this translates to, likely, less discretionary income for a broad swath of U.S. workers. Last week, data showed consumer spending rebounded by the most on record in May, up 8.2 percent. At the same time, personal income was off 4.2 percent, off a tailwind of stimulus checks. That decline in income will widen as the sweetened unemployment benefits peter out (and across 30 million Americans, that’s a widespread loss of spending power).
Overall, consumers spent an additional $892.6 billion in May, with a majority of that money, $590.4 billion, going to pay for goods — the tangible, durable kind. As we noted in this space, the increase was led by more spending on cars and trucks and auto parts, as well as recreational goods and vehicles. In other words, there seemed to be a fair amount of prep for getting away from it all.
And on the other side of the summer lie vexing questions for retailers. After all, we’re now in the third quarter, and the all-important holiday season is in sight. And it’s anybody’s guess how it may shake out — Amazon, after all, has delayed Prime Day to beyond October. The fate of brick and mortar is still being shaped. And to paraphrase Bette Davis: Fasten your seatbelts.