Resilience is the name of the game. Over 18 months into the pandemic, with the Delta variant scorching through the country, one might think that consumers would still be hiding at home and refusing to go out and spend. But despite the higher level of contagion with the Delta variant, and the fact that companies across the nation are struggling to find workers, businesses are still making money. As the British rock band Queen sang in the 1990’s, the show must go on! But the pliancy of the country’s economy is surprising even the experts, who expected to see the Delta variant wreak further havoc with the U.S. economy, which was just starting to bounce back from the previous year. But with a boost from back-to-school shopping and Americans just wanting to achieve some normalcy, the economy is slowly inching forward.
Although many economic experts felt that the Delta variant would continue to take a bite out of the economy, recent spending habits have actually shown growth. Sales at the nation’s retailers rose 0.7% in August, after they had dropped in July. Although the percentage is not that high, considering all that the country is facing, it still feels like a victory. Economists were looking for a .7% decline at best, and were pleasantly surprised.
“Upside surprises on this scale don’t come often, and this one indicates a real degree of resilience on the part of consumers,” Pantheon Macroeconomics chief economist Ian Shepherdson said.
So how is the economy holding despite a new variant surging? With people looking for a little normalcy, retail therapy is one thing they can still accomplish. Additionally, college campuses, schools, and offices are reopening, which spurred many purchases at big box stores and grocery stores so that students and teachers could be set up for success. Another avenue of spending includes furniture and hardware sales, which have added to the positive trajectory.
The stimulus checks are long past delivered, and the last of the programs to help those entrenched by the pandemic ended at the beginning of September. Experts thought these facts would affect the economy negatively, but have been pleasantly surprised. “U.S. consumption is not slowing as quickly as it appeared a month ago despite the fading stimulus, and the Delta variant did not much affect the industries feeding into retail sales,” said Chris Low, chief economist at FHN Financial in New York. “The economy continued to hum in August.”
Economists are hoping this will continue. In some parts of the country, economists believe the Delta wave has crested and more consumers will get vaccinated, feeling safe once more to shop as usual. Along with this, because of the worker shortage, many employees are getting raises, which leads to a higher level of savings for Americans, and therefore an increase in spending money.
“Confidence may have plunged, but rising incomes, employment and accumulated savings mean that people continue to spend,” ING chief international economist James Knightley said. Consumer spending is by far the biggest contributor to economic growth, and retail sales of computers, cellphones, cars, home goods, and even restaurant meals are a great indicator of how the economy is doing.
When it comes to economic complications, the American economy is not out of the woods yet. The hospitality industry is still suffering, and airlines are seeing a decrease in traveling after it had picked up in early summer. With business travelers still somewhat in a holding pattern, this affects airlines, hotels, and restaurants.
Another problem facing the economy are continued supply chain issues, and there are definite hold-ups for goods coming from Chinese ports. This is affecting the sale of many consumer goods, from breakfast sandwiches to SUVs.
Apple News reports, “Meanwhile, a global shortage in computer chips continues to weigh on car sales, which fell 3.6% last month. Dealership inventories are running low, preventing consumers from buying cars despite strong demand.” There are people who want to spend money, and have the increased salary and savings to do so, but there are simply no cars available.
The future holds some optimistically cautious reports. JPMorgan Chase last Wednesday projected “gross domestic product to expand at a 5% annual rate in July through September, down from a prior estimate of 7%, citing lower demand and production shortages, particularly in the car industry.” Although the increase is not as much as previously expected, the positive path is welcome news.
As the fall makes way for the very consumer-centric holiday season, spirits are both guarded and buoyant. “We maintain our confidence in the historic strength of consumers and fully expect a record year for retail sales and a strong holiday season for retailers,” NRF President Matthew Shay said.
Americans have been putting money in the bank, and have accumulated $2.5 trillion in savings throughout the pandemic. And with 10.9 million jobs still open across the nation, wages are growing like never before so business owners can fill the positions.
The country’s economists, for the most part, expect a continued positive trajectory for the economy. “Delta? What Delta?” Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisers said. When asked if he thought the variant would slow or stop the recovery, he said, “Absolutely not. It’s an external shock that’s denting it temporarily.”
Despite the setback of the Delta variant and Americans’ worry about what is to come, there is reason to believe that holiday spending will be on point as the country continues to right the ship that was tossed about by the pandemic. With schools opening, consumers hungry for normalcy, and increased wages for many workers, there is definitely reason to hope.