Coronavirus: US economy will take over four years to recover from worst retail sales on record, economists say

The historic fall was lead by a 79 per cent dive in fashion and clothing sales

It will take more than four years for the US economy to recover from the largest fall in consumer spending ever recorded as a result of the coronavirus lockdown, economists say.

The Census Bureau on Friday released retail sales figures showing a 16.4 per cent drop in April from March, and down 21.6 per cent unadjusted year-over-year.

That follows a previously record-setting 8.3 per cent decline in March when stay-at-home orders were first implemented to slow the spread of coronavirus.

James Knightley, chief international economist for ING, told The Independent that, based on the experiences of the Global Financial Crisis, it could take more than four years for the economy to recover.

"Given the 23 per cent cumulative fall in retail sales over the last two months, this alone is enough to knock more than 6 percentage points off the level of nominal GDP," he said.

"Remember that the Global Financial Crisis saw output fall 4 per cent peak to trough and it took 14 quarters for that output to be recovered. We see little reason for the lost output in the current crisis to be recovered much quicker than that."

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The sharpest declines from March to April were felt in sports, electronics and furniture, with clothing stores the hardest hit with a 79 per cent decline.

Fashion store J. Crew and luxury department store Neiman Marcus were two of the first major retailers to declare bankruptcy as a result of the pandemic lockdown, with others are likely to follow.

Neil Saunders, managing director of GlobalData Retail, said total retail sales in April plummeted by 20.9 per cent on a year-over-year basis, making it the worst performance on record, beating both May 1938 when sales declined by 18.5 per cent and February 1981 when sales dropped by 15.3 per cent.

"Essentially, April was the month when large parts of the retail economy simply ground to a halt," he said.

"The shutdown of most physical apparel stores, plus the sharp decline in outfits needed for work and leisure contributed to the precipitous drop. While there were a few bright spots, most notably from athleisure and comfort clothing, consumers simply turned their backs on fashion in April."

The National Retail Federation's chief economist, Jack Kleinhenz, said month-to-month comparisons provide little insight other than indicating that most of the economy was on lockdown.

"Now that we're in mid-May, many businesses are already starting to reopen," he said.

"Relief payments and pent-up demand should provide some degree of post-shutdown rebound, but spending will be far from normal and may be choppy going forward."

Here is the full breakdown of how the coronavirus lockdowns affected retail spending in April compared to March:

• Online (non-store) retailers: +8.4 per cent
• Grocery stores: -13.2 per cent
• Pharmacies and other health/personal care stores: -15.2 per cent
• Big-box (general merchandise) stores: -20.8 per cent
• Gas stations: -28.8 per cent
• Department stores: -28.9 per cent
• Restaurants and bars: -29.5 per cent
• Sports, music and other hobby stores: -38 per cent
• Furniture stores: -58.7 per cent
• Clothing and accessories stores: -78.8 per cent

By removing categories most affected by the coronavirus lockdowns like automobile dealers, gas stations and restaurants from the retail sales figures to focus on core retail, the National Retail Federation calculates that April was down 14.1 per cent from March compared to the Census Bureau's 16.4 per cent.

"These retail sales numbers are not a surprise given the current state of affairs," said federation president and CEO Matthew Shay.

"The vast majority of retail stores have been closed, we are in the midst of historic unemployment and when it comes to personal finances, discretionary spending takes a back seat to essentials."