The latest in a long list of ‘historic lows’ since Covid-19 wiped out the global economy is the total collapse of the American retail sector.
Data released by the US Census Bureau has shown that retail sales in April were 16.4% less than in March, representing a 21.6% year-on-year decline when compared to April 2019.
Although not unexpected, with Americans staying at home and millions now unemployed, the decline was significantly less than most economists had predicted.
In the midst of this economic crisis, consumer confidence has plummeted, with many Americans avoiding unnecessary purchases.
Discretionary spending has therefore taken a big hit. Weak demand has been particularly felt by clothing and accessory stores with sales down by a whopping 89.3% compared to April of last year.
Although many states are beginning to reopen and consumers will be shopping once again, the recovery of the retail sector is likely to be slow and littered with the collapse of many businesses as they succumb to the financial difficulties which the spread of Covid-19 has brought on them.
THINK LIKE AN ECONOMIST!
Q1. Why has the retail sector experienced weak demand?
Q2. Explain why consumer confidence is low.
Q3. What is meant by the term discretionary spending?
Q4. With reference to this article and your knowledge of current economic affairs, analyse the reasons why the recovery of the retail sector is likely to be slow in the US.
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