America’s Spending Wave Is Yet to Hit

The Wall Street Journal – The Delta variant of Covid-19 might have met its match in the American consumer.

The Commerce Department on Thursday reported that retail sales rose 0.7% in August from a month earlier. Even after taking account of downward revisions to July sales, that was far better than the 0.8% decline that economists expected to see.

The gains were fairly broad-based. The three retailing categories that registered a sales drop were car dealers, electronics and appliance stores, and a group that includes stores such as sporting goods retailers. Those declines were due to supply-chain problems rather than a Covid-19-inspired damping of consumers’ willingness to spend.

The one place where the Delta variant did appear to leave a mark was at eating and drinking establishments, which were even in August with a month earlier. Travel-related services categories aren’t included in the retail sales report, but private data show that spending on flights and hotels also slipped last month.

What Thursday’s report suggests is that rather than clamping down on their spending, many people may have merely shifted it. Department stores, nonstore retailers (a category dominated by ), furniture stores and grocery stores were among those registering significant sales gains.

The fact remains that many Americans have built up a significant amount of savings since the Covid-19 crisis began, thanks both to an initial sharp reduction in their spending, and the large amount of income relief the government provided. Meanwhile, a tight labor market may not only be boosting wages but also making workers more confident in their job security, and making people who aren’t working more confident in their ability to get a job when they go on the hunt.

Neither the country nor the world appears close to through with Delta yet, of course, and Thursday’s report doesn’t take away from the fact that the pandemic’s resurgence is holding back spending to some degree. The number of new Covid-19 cases has fallen over the past two weeks, but with schools in full swing and colder weather on its way it is too early to even think about sending an all clear signal. A high degree of uncertainty over when children under 12 will be eligible for vaccination is probably prompting some parents to keep money in reserve, in case a classroom quarantine disrupts work, while also delaying decisions on when to take that big family trip.

But if sales can stay solid despite Delta, one can only imagine what might happen when the virus threat really fades. The pandemic has consistently made a mess of forecasts, but investors should be at least open to the possibility that in the not-too-distant future spending is going to fly.