Without the boost of the stimulus checks, retail sales dipped in February compared to the previous month. But, economists look forward to increased spending in the coming months as the relief aid goes out, restrictions get lifted and the weather gets warmer. 

Retail sales declined a seasonally adjusted 3% in February, the Commerce Department said on Tuesday. The number follows an exponentially increased spending in January largely attributed to stimulus payments. January’s retail sales were revised upward from an estimated 5.3% to 7.6%.

Consumer spending in the spring and summer is expected to rebound as additional government stimulus is distributed and consumers grow fatigued of the pandemic and look for ways to spend their funds.  Although spending continued to surpass pre-pandemic levels, economists had expected a decline in February given that January was boosted by $600 stimulus checks.  However, a series of snow and ice storms crippled large parts of the economy and closed stores, further depressing consumer spending last month. 

“This is largely a weather story,” said Scott Brown, chief economist at Raymond, James and Associates Inc.  “January was unusually mild and February saw exceptionally bad weather, so that’s the anomaly we didn’t expect to see.”

Sweetness Express, by Chineze Nnadi, saw a setback in revenue in February because of the winter storms. Photo courtesy: Chineze Nnadi.

Winter storms meant that Sweetness Express saw delays in order shipments of cakes to customers. Chineze Nnadi, owner of the business based in Clive, Iowa, said the storms set her small online bakery back by over $200, which she had to pay for out of pocket. The delays left the cakes moldy and inedible by the time they were delivered. 

“For my last reimbursement, I had to pay $50 in shipping via Fedex to get a new cake to the customer in Massachusetts after the one they had gotten was moldy,” said Nnadi, a 31-year-old baker who also works at BLK & Bold coffee company on the side.

Despite weather inclinations, some businesses like Ron Martin’s Grapevine Gifts in Lake Jackson, Texas,  are thriving. 

“We were fortunate because we never lost power,” said Martin about his gift shop. “Although we were closed for three days because the roads were iced over, our business wasn’t affected.” 

Spending decreased across major categories in retail sales such as home improvement, furnitures, auto sales, electronics as well as restaurants. However, gasoline sales rose only because of price increases not higher demand.

Regardless of the month to month decline, retail sales were 6.3%  above February, 2020 and up by 6%  over the last three months compared with the same period in 2020.

Retail sales were up 6.3% this February compared to 4.7%  in Feb. 2020

“It suggests that consumers are in a generally good shape, we’ve had the fiscal stimulus checks now for those at the lower end of the income spectrum,” said Brown. “And once vaccines are distributed, if we can get enough people accepting the vaccine, we could get back to normal by the summer.”

The $1,400 federal stimulus checks, which millions of Americans are bound to receive as part of the $1.9 trillion relief bill, accelerated vaccination programs and easing of business restrictions are expected to drive up retail sales in the coming months. 

These factors combined would spur consumer spending on services, particularly in the leisure and hospitality sector, that have been hard hit by the pandemic. 

“So, it’s going to maintain pretty strong spending for the consumer sector for the first half,” said Stephen Gallagher, chief economist at Societe Generale. “And the second half is going to be more story of restaurants reopening, traveling, hotels and the lift of a lot of our virus concerns, either by reduced virus spread and or vaccine dissemination.”

Outdoor activities such as sporting events, live concerts and travel, are expected to be a driving force of spending in the second half of the year as opposed to the purchase of goods that has been driving sales for the past year. 

“To see where we’ve come from back in March last year, you wouldn’t have thought it possible given the news we were getting in early last year,” said James Knightley, chief international economist at ING Financial Markets LLC. “I think it’s been a really good performance of the economy to start the year in a really strong manner and the momentum can continue to build.”

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