Virtual schooling dents retail sales, Trump economic message

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By Ann Saphir

(Reuters) – Slower-than-expected sales at retailers in August suggest a speed bump is emerging in the U.S. economic recovery from coronavirus lockdowns, less than two months before the Nov. 3 presidential election.

Overall, retail sales have returned to their pre-crisis levels and then some, gaining 0.6% in August, the Commerce Department said on Wednesday. The rebound plays into U.S. President Donald Trump’s narrative of resurgent growth after a sharp pandemic downturn. Incumbent presidents are generally helped at the polls by a strong economy, and hurt by a weak one.

But last month’s rise was driven in part by an increase in gasoline prices, not typically a cause for consumer celebration. Meanwhile core retail sales, a closer measure of underlying spending trends, fell 0.1% last month. Both readings fell short of economists’ expectations.

GRAPHIC: A rebound, then sideways? – https://graphics.reuters.com/USA-ELECTION/ECONOMY-RETAILSALES/azgpoamerpd/

Back-to-school shopping season, or the lack of it, was one cause. Many students actually could not head back to the classroom because of COVID-19 restrictions, and their curbed spending on supplies helped drive down core retail spending, said Regions Financial Corp (NYSE:RF) economist Richard Moody. Meanwhile, a jump in sales at restaurants and bars drove most of the gain in overall retail sales.

The softening comes as nearly 30 million Americans are on some form of unemployment insurance. An extra $600 weekly that out-of-work-adults were getting in government aid expired at the end of July; it was replaced by a program that sent out $300 payments, but stopped taking new applicants on Sept. 10.

Lawmakers have so far failed to agree to any new aid package, and without more fiscal help, economists say the recovery will stall.

“The economy is weak: there are no two sides around that,” says Eric Winograd, senior economist at AllianceBernstein (NYSE:AB). Part of a voter’s calculus in picking a president may be, “Do you think additional stimulus is necessary, and if so what do you want that to look like?”

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