A resurgence of Covid-19 cases across the country has injected fresh uncertainty into early indications that the economy has begun to recover as businesses reopen, generating conflicting data that makes it difficult to say how steadily the comeback will continue, the National Retail Federation (NRF) said today.
“Optimism about the economy and retail spending is being tested daily with the spread of the coronavirus,” NRF Chief Economist Jack Kleinhenz said today. “Big questions are looming, and we are all grappling to discern what incoming data is telling us about the health of the economy and consumers. Depending on the data selected, the answers are not entirely clear.”
Kleinhenz’s remarks came in the August issue of NRF’s “Monthly Economic Review,” which said monthly indicators showed the economy improving in May and June but that more frequent data showed the pace of recovery flattening by mid-July.
“A key question is whether the pace of growth and momentum will carry forward over the next few months,” Kleinhenz said. “Based on quarterly and monthly data, the U.S. economic recovery continues despite elevated Covid-19 cases. But in examining weekly data, the pace of improvement appears to be slowing. Could it be that we are at or heading back to the same spot we were at two months ago?”
For example, the NRF said several economic indicators had recently swung to positive numbers, such as a rise in consumer spending of 8.2% in May, ending two consecutive months of decline, and another rise of 5.6% in June. However, other figures are still mired in recession, like the Federal Reserve Bank of New York’s Weekly Economic Index – a composite of indicators – which worsened from -6.65% on July 18 to -7.24% as of July 25, with officials citing a decrease in retail sales.
Overall, while many reports initially “showed the economy on a good start down the recovery runway, they now suggest that the economy is moving sideways,” Kleinhenz said. “Time will tell, but the bottom line is that the economy is far from being out of the woods. The question is whether it is re-entering the woods.”