Retail Sales Rebound Despite Delta Variant Surge

September 16, 2021

Americans increased their spending last month, despite anxieties about the spread of the Delta variant of Covid. Retail sales climbed 0.7% in August, following an unexpected decline in July, according to the Commerce Department.

The increase was likely driven by back-to-school shopping, as consumers spent more at big-box retailers and grocery stores. Shoppers also made big purchases like furniture and hardware. This spending was enough to offset another big drop in sales of automobiles, which continue to be hindered by a shortage of semiconductors.

It remains possible that hesitancy on the part of consumers amid mask mandates and capacity restrictions is weighing on the economy in ways not seen in retail data. While the figures include restaurant sales, which were flat for the month, it does not include spending on travel and many forms of recreation. Initial data suggests that Americans have reduced spending on travel in recent weeks. To get a full sense of the impact the Delta variant has had on consumer spending, we will have to wait until the Commerce Department’s full report is released in early October.

Still, the data suggest that the economic recovery has remained resilient in the face of the coronavirus’s latest wave. Despite remaining flat in August, restaurant sales have climbed more than 30% since this year. Businesses that may be struggling have also avoided laying off workers. The number of initial claims for unemployment insurance, which economists view as a proxy to track layoffs, climbed by 20,000 last week, to a total of 332,000. Despite the increase, this remains near the lowest level since the pandemic began, and economists attribute the increase to the impact of Hurricane Ida rather than economic reasons.

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