A woman carries Nike shopping bags at the Citadel Outlet mall as the global coronavirus disease (COVID-19) outbreak continues in Commerce, California, Dec. 3, 2020.
Lucy Nicholson | Reuters
Buoyed by government stimulus controls, consumers are expected to ramp up spending in January, and the trend is likely to continue to gain momentum as the economy re-opens.
Economists expect retail sales to be up 1.2% after a surprising decline of 0.7% in December, Dow Jones said. The January retail sales report will be released at 8:30 a.m. ET on Wednesday, and sales are also expected to be up 1% without vehicles.
“I think the main story is that things have turned around,” said Stephen Stanley, chief economist at Amherst Pierpont. “November and December were pretty negative. As the virus gained momentum, people started to withdraw. In January you got rid of that a bit.”
Stanley said spending was also likely boosted by $ 600 incentive vouchers sent to individuals in early January, as part of the latest Covid bill, passed by Congress in late December. He expects sales to be up 0.8%, but that profit could be even greater in the coming months.
“The $ 900 billion in tax credits has gone into the economy and it shows,” said Mark Zandi, chief economist at Moody’s Analytics. “It’s really strong across the board. It was mostly home-based retail. Electronics and appliance stores and online would be good examples of that. But in January it was all of the above. The reopened retailers also showed strength. and restaurants saw a revival. “
Zandi said he expects total retail sales to be up 2.1%, based on business-to-business data from software company Cortera, which tracks transactions for small and medium businesses.
“The Cortera numbers are unequivocally strong. I think we will move unless the pandemic goes in the wrong direction,” he said. “The economy is going to be booming.”
According to Cortera, retailers’ spending on non-salary costs increased 16.7%. Cortera said the level is up 5% from December, suggesting retail sales will also rise.
Economists also saw other signs that spending was increasing.
“Credit and debit card data suggests that retail sales were quite strong,” said Diane Swonk, chief economist at Grant Thornton. “We also got some relaxation from mitigating measures that should help too, and these all came before we had the devastating cold that slowed things down.”
Swonk said the incentive checks were important. “I really think we were headed for a double dip. We had a pretty dramatic slowdown as we entered the end of the year,” she said.
The Biden administration has proposed another $ 1,400 incentive check, running through Congress. That should also increase the consumer’s ability to spend.
“People are getting vaccinated. That’s going to be another burst of activity,” said Stanley, the Amherst Pierpoint economist. “I would think that from now until mid-year we will see basically improvement. I think the opening really starts in March.”