Economic challenges brought on by the pandemic will continue in 2021, but the new stimulus legislation will help accelerate the nation’s ongoing recovery.
That’s according to National Retail Federation chief economist Jack Kleinhenz who said he expects that retail sales spending will get a boost from the new round of stimulus.
“Consumers responded quickly to last spring’s stimulus checks, and distribution of the new checks will come at a critical time that will help carry 2020’s momentum into 2021,” Kleinhenz added.
The new legislation, signed Dec. 27, will provide one-time $600 stimulus checks to individuals making up to $75,000 a year and extends $300 weekly checks for the unemployed for almost three months. The new aid is particularly important to low-income families and the unemployed who have faced challenges paying day-to-day bills in recent months, according to Kleinhenz.
Despite the expected boost from the new stimulus checks, the challenging economic environment that marked last year will almost certainly continue in 2021, Kleinhenz advised.
“The coming year might be just as eventful as the economic recovery faces many uncertainties,” he said. “Recoveries do not proceed in a straight line and the prospects for volatility over the next few months are high. Nonetheless, just like the old Timex watch commercials, the economy takes a licking but keeps on ticking.”
Kleinhenz’s remarks came in the January issue of NRF’s Monthly Economic Review, which said economic activity will likely pick up after the winter months and into mid-year as COVID-19 vaccines allow more activities to resume. The availability of a vaccine during the first quarter – historically a soft spot in the economy every year even without a pandemic – “couldn’t be better,” Kleinhenz said.
The report noted that some of the money normally spent on traveling, dining out and entertainment shifted from services to goods in 2020, especially big-ticket home-related items like appliances and furniture. Rising wealth from increasing home values and stock prices have supported additional consumer purchases of retail goods, and the new stimulus checks should encourage consumers to “reengage” on non-durable goods and services.
While consumer spending and retail sales have largely returned, results have varied among retail sectors and “economic uncertainty is very prevalent and at near-record levels,” the report said. Overall economic activity is not expected to return to pre-pandemic levels until late 2021 and employment at pre-pandemic levels is unlikely to return until well into 2022 or possibly 2023.