The coronavirus pandemic will continue to hinder economic conditions in 2021, but the latest round of federal stimulus spending will help maintain and accelerate the nation’s ongoing recovery by inspiring wary consumers to return to their retail shopping habits, the National Retail Federation (NRF) said today.
The NRF acknowledged that the country faces some tough challenges in bouncing back from the health crisis, noting that “economic uncertainty is very prevalent and at near-record levels.” While consumer spending and retail sales have largely returned to normal, results have varied among retail sectors and overall economic activity is not expected to return to pre-pandemic levels until late 2021. Likewise, employment is unlikely to return to its pre-pandemic levels until well into 2022 or possibly 2023.
But stimulus checks can be a powerful lever for change. Just as consumers responded quickly to the personal aid included in last year’s CARES Act, the distribution of the latest round of checks comes at a “critical time” to boost retail sales spending in the traditional weak first quarter, NRF Chief Economist Jack Kleinhenz said in a release. Combined with the availability of a Covid-19 vaccine, the initiative could help carry 2020’s momentum into 2021, he said.
Legislation signed December 27 will provide one-time $600 stimulus checks to individuals making up to $75,000 a year and will extend $300 weekly checks for the unemployed for almost three months. That new aid is particularly important to low-income families and the unemployed, who have faced challenges paying day-to-day bills in recent months, according to the NRF.
Even though full recovery has yet to come, the economy has made considerable progress, in large part because some of the money normally spent on traveling, dining out, and entertainment shifted from services to goods in 2020, especially big-ticket, home-related items like appliances and furniture, NRF said. In addition, rising wealth from increasing home values and stock prices have supported extra consumer purchases of retail goods. The new stimulus checks should now encourage consumers to “reengage” on non-durable goods and services.
“As we closed out 2020, it was an end to a whirlwind year whose challenging economic environment will almost certainly continue in 2021,” Kleinhenz said. “The coming year might be just as eventful as the economic recovery faces many uncertainties. Recoveries do not proceed in a straight line and the prospects for volatility over the next few months are high. Nonetheless, just like the old Timex watch commercials, the economy takes a licking but keeps on ticking.”
Spending in other federal appropriations passed last week will focus on infrastructure such as cargo ports and harbor maintenance, as well as support for airlines and highways. And industry groups are already lining up support for a third covid stimulus bill that could arrive during the first year of the incoming Biden Administration.