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Beyond the surge in retail sales lurks a growing consumer divide

Bloomberg logoBloomberg 6/16/2020 Alex Tanzi

Despite the unexpected jump in U.S. retail sales in May, the pandemic is changing consumer behavior in a way that threatens to widen the inequality gap, according to a report this month from the JPMorgan Chase Institute.

The institute’s analysis -- which relies on about 450 million monthly credit card transactions made by a rolling sample of 11 million customer accounts -- showed that Covid-19-related lockdowns increased consumer spending at nonlocal retailers.

“This is good news for consumers, who can get a larger variety of goods and services at lower cost,” said Marvin Ward Jr., the institute’s local commerce research lead. “However, it’s most likely to benefit those with higher incomes, and local retail remains a lifeline for lower-income consumers.”

In May, national retail sales soared 17.7% from the prior month, the biggest jump on record and double forecasts. That followed a 14.7% drop in April, the largest monthly decline in nearly three decades of record-keeping, and an 8.3% decline in March, according to Commerce Department data released Tuesday.

Thousands of stores and restaurants reopened after lockdowns were lifted last month. Federal stimulus checks and tax refunds fueled a burst of spending.

a screenshot of a computer screen: Changing Behaviors © Bloomberg Changing Behaviors

Sales at clothing stores, gas stations, restaurants and bars were off from the comparable month a year ago. Meanwhile, online sales now take in more than 1 in every 6 dollars spent as dollars leave local economies.

“The longevity of these spending changes associated with the Covid-19 pandemic will determine how different communities and consumers fare in the new retail landscape,” Ward said. “The economic hardship we are currently experiencing will likely have a long tail because so many people have lost their jobs and so many businesses will not survive the fallout of the past few months.”

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