PROVIDENCE – Despite a higher-than-expected rebound in national retail sales under the U.S. Department of Commerce’s latest report, we are not out of the woods yet, said Jaime Ward, head of retail finance for Citizens Bank.
Acknowledging that the 17.7% jump in retail sales from April to May is a sign of pickup in economic activity, Ward warned, in an interview with the Providence Business News, that the rebound could be short-lived.
Ward attributed the spike in retail sales to federal stimulus checks, which appear to have served their intended purpose in encouraging people to pour money into a struggling economy. Recent reopenings in many states have also created an environment conducive to “revenge spending,” in which consumers sick of being cooped up in their homes have taken full advantage of looser restrictions to shop, dine and spend money, Ward said.
However, with record-high unemployment persisting, consumers are likely to tighten their wallets again when the boost to unemployment payments ends on July 31, Ward said. He also feared that many currently furloughed workers may not be rehired as intended, further dampening consumer spending patterns.
The COVID-19 pandemic’s impact on tourism will also hurt retail merchants, particularly in tourist-dependent communities such as Newport, where much of retail businesses’ profits are tied to a summer tourism season, Ward said.
“People are going to be happy to continue going to the beach in Newport, but if they want to go to a restaurant or a shop, things might look quite different,” he said, adding that “spontaneity is out” when it comes to retail spending.
Looking ahead, Ward predicted considerable “carnage” in the service and retail industries over the next nine months, with even businesses that have recently reopened being forced to shutter permanently.
“There are going to be real winners and losers,” he said.
Nancy Lavin is a staff writer for PBN. Contact her at Lavin@BPN.com.
