|
|
The expanded child tax credits that were part of president Joe Biden’s American Rescue Plan expired 30 December, canceling the $300-per-child monthly stipend that, collectively, put an average of $16 billion a month into the U.S. economy, according to J.P. Morgan.
That was more than twice what Americans spend on average each month on electronics and in appliance stores, noted The Wall Street Journal.
The credits gave families an advance on half the child credits they would normally claim when filing their income tax forms.
The payments extended families’ buyer power after federal stimulus payments ended last spring. Plans to extend that credit are doomed, casting a pall over retailers’ new year.
Retail sales slumped last year between April, when stimulus payments ended, and July, when the credits began arriving. In pre-COVID times, retail sales usually rose during that period as people spent for home and garden supplies, sports equipment, and other warm-weather pursuits.
From mid-July, when the credits began appearing in people’s bank accounts, retail sales steadily rose through the year, the WSJ noted, especially for clothing and in department stores, according to Mastercard’s SpendingPulse data.
At the same time, household savings rates, which had boomed during the lockdowns, have slid back toward pre-2020 COVID War levels.
The credits also helped buoy retailers’ market values.
Lowe’s and Home Depot outperformed the Standard & Poor’s 500 index by about 30 percentage points in 2021; Dollar General, a haven for low-income shoppers, is trading at a multiple 28 percent above its five-year average, the WSJ noted.
That might not last: “shoppers might have a lot less to spend as 2022 kicks off,” the WSJ cautioned. “The next six months…there will be a wave of bankruptcies,” John Lincecum, co-founder of Boston’s Turtle Swamp Brewery, predicted in a comment to the WSJ.
“The little guys can’t keep it up,” he said.
TREND FORECAST: With government support payments ended, inflation rising faster than wages, supply chains remaining clogged… the retail shakeout will continue, especially in city centers where an estimated 40 percent or more of commuters will be working remotely at least two days a week.
As well as retailers themselves, commercial property owners and landlords will face a shakeout of their own, with small holders selling out or going bust.
That, in turn, will drive down property values, robbing municipalities of property tax revenue and forcing them to cut services or to dun residents with higher tax rates.