Retail: Delta May Temporarily Slow Some In-Store Shopping and Dining

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The Delta variant of COVID-19 is likely to slow consumer spending on some services, such as travel and eating out, through September. In-store shopping will also likely take a temporary hit. The infection rate is now rising strongly in most parts of the country. Spending should then rebound vigorously as the Delta threat subsides, which should begin to happen during September.

Child tax credit payments being sent out by the IRS should support consumer spending this year, especially ahead of the holidays. Payments will be made on the 15th of each month through the end of the year. The stimulus law raised the credit for 2021 only, and authorized the IRS to pay out half the increased credit this year, instead of having families wait to file their 2021 tax returns next year. The credit is $3,600 for each child age five and under, and $3,000 for kids ages six through 17, subject to income limits.

Retail sales excluding motor vehicles declined in July, mostly because of a shortage of new cars and trucks for sale. Manufacturers have cut production of new vehicles for lack of needed computer ships. Once this problem is resolved, auto sales will surge again. However, non-vehicle retail sales also dropped in July. Some of that may be Delta-related, and some may be because consumers have now spent the government stimulus checks they received earlier this year.

High building materials costs have likely hurt some home remodeling activity, and sales of building materials have declined. Lumber prices are now easing, however, which should help.

Retail sales excluding gasoline should rise by 17% this year. All this spending is likely to help boost yearly GDP growth to around 6%