After a record drop in retail sales, there's a massive hole to dig out of

We knew retail sales would be horrible for April as many types of shops and restaurants were shut down. So how bad was it?

Sales at U.S. retailers sank a record 16.4% in April after coronavirus lockdowns shuttered much of the economy, cost millions of jobs and spawned an unprecedented slump in consumer spending.

Retail sales tumbled in every category except online shopping, the government said Friday. Sales also sank by a revised 8.3% in March, easily marking the worst back-to-back declines in modern American history.

The two-month combination tells me even more of a story than the one-month drop. It adds up to a total decline in retail sales of 23.4% vs February, meaning ¼ of what was being spent before COVID-19 broke out is GONE. That is an amazing collapse, and while ¾ of the sales decline in March was limited to gasoline and auto sales for March, this was not the case in April. Many areas of retail fell apart as the COVID-19 closings increased, with some sectors nearly grinding to a complete halt.

…excluding gas and autos — two of the largest sources of retail spending — sales sank 16.2%.

Grocery stores, which benefited from consumer stockpiling in March, posted a 13% decline in sales. Receipts also tanked 79% at clothing stores, 60% at electronics stores, 59% at furniture stores, 30% at bars and restaurants and 15% at pharmacies.

To illustrate the damage, consider apparel sales. Receipts at clothing stores dropped to $2.4 billion from $22.1 billion in February, the last month before the pandemic.

But we also saw indications that consumers had stopped panicking in April, or at least that’s how the financial media was spinning today’s consumer confidence report.

After a two-month freefall, U.S. consumer sentiment improved slightly in early May as some states began to reopen their economies and the spread of the coronavirus slowed, a closely followed survey showed.

The preliminary reading of the consumer-sentiment survey in May edged up to 73.7 from 71.8 in April, the University of Michigan said Friday. Economists had forecast a small decline.

Americans were less confident about their own finances, but a massive infusion of federal aid in the form of stimulus checks, extra unemployment benefits, and contributions to the salaries paid by small businesses helped lift their spirits.

Inside the report, it looks like the increase in consumer sentiment was due to a bit more comfort with current conditions, but the outlook dimmed further, which at least indicates that Americans recognize that this thing isn’t going to be back to normal tomorrow.

But I still think people are underestimating the depth of the hole that we’re in, because it happened so suddenly and to such an incomprehensible level. Many of those stimulus measures were one-time boosts that may not come back for a while, especially given that Moscow Mitch and the rest of the GOP Senate now is saying they won’t pass a new bill dealing with our economic troubles for at least 2 more weeks.

I have a hard time believing we’re gaining the ¼ of lost retail sales back any time in 2020, and maybe for a few years after (depending on how much COVID-19 sticks around and how we handle the response). A lot of people simply will not go out and spend in the ways that they did before this pandemic hit, and there’s nothing that’s coming out of TrumpWorld to give people the confidence that this thing is under control.

Speaking of being in a deep hole.

For some reason, the stock market has been up the last couple of days, despite nothing but bad economic news. And it all seems to be this misplaced optimism that misses the fact that just because the economy might grow from these reduced levels, it still won't change the fact that we are way below where we were before COVID-19 hit. And I see little chance of there being something in the private economy to boost demand and employment in a way that will come close to recovering the major losses that we have had.

So what we are left with is continued infusions of federal aid to prop up the finances of people and corporations that are going through tough times. If that train of money gets cut off, I don’t see what makes up the difference. It will not be financially viable for many of these retail establishments to stay open, or certainly not with the staff that they once had. Which means we will have to deal with more economic damage, no matter how much GOPs claim the have “opened the economy.”