The U.S. has retained its standing as the biggest retail market in the world thanks to the government stimulus and the resilience of the American consumer.
Retail sales in the U.S. will, “incredibly,” increase 0.8% this year, reaching $5.506 trillion, according to eMarketer, up 11.2% from an April forecast of a 10.5% decline. The increase represents $612.20 billion more in sales than eMarketer had expected (and a $41.20 billion increase over 2019).
In April, eMarketer had projected that China would “back-door” its way into the No. 1 global ranking for overall retail sales by the end of 2020 because of the more precipitous spending decline in the U.S. However, the scenario has not played out as anticipated. China’s retail market is now forecast to fall by 2.9% (compared with a previous forecast for a 4.0% decline). China’s retail sales in 2020 are expected to reach $5.130 trillion in 2020, down from $5.283 trillion in 2019.
“While China’s performance will turn out to be relatively close to eMarketer’s prediction, the U.S. has done an almost unbelievable about-face when it comes to consumer spending,” wrote eMarketer’s Cramer-Flood. “… against all odds, the U.S. will widen its lead on China this year, rather than lose it."
According to Cramer-Flood, the results reflect the “fundamental structural differences” between how the U.S. and China run their respective economies.
“In China, the economic development model is oriented around investment, construction, manufacturing, infrastructure build-outs, real estate development, and giant state-owned (or state-directed) enterprises that undertake projects in service of these goals,” he wrote. “Therefore, in times of economic stress, China’s best bet is generally to juice investment activity by major corporate players by implementing policies that help energize these constituencies.”
As a result, China’s recovery and stimulus packages centered on supporting strained businesses rather than struggling households or individuals. Household spending languished and did not bounce back nearly as quickly as the rest of the economy.
In contrast, the U.S. economy is overwhelming consumer-centric, Cramer-Flood stated, as evidenced by the stimulus package, which gave a boost to consumer spending. But sales also got a big boost as consumers, largely stuck at home and unable to travel and visit entertainment venues and other service providers, went online and spent their money on retail goods.
“To put it succinctly: Nobody went anywhere or did anything in 2020, and instead they used their activities budgets to buy stuff,” Cramer-Floyd wrote.