In March, U.S. industrial activity slowed by 5.4 percent from February, the biggest month-to-month drop since the end of World War II. Retail sales shrank 8.2 percent from February, the greatest single monthly decline since 1992 when records began to be kept.
Spending in restaurants and bars was off by 25 percent, as were vehicle purchases.
Sales at clothing stores were halved.
The previous record monthly pullback in retail sales was late in 2008, when sales contracted by 4 percent for two consecutive months. Analysts say April’s decline could surpass that number.
Groceries were a bright spot, with sales soaring 27 percent. Walmart and Target reported about 20 percent greater sales as consumers laid in supplies of cleaning products and other necessities.
Many analysts think, however, that panic buying has now begun to ease and the spike in sales of those necessities will soften.
Before the economic lockdown, America’s 16 million retail workers made up a tenth of the entire U.S. workforce; only health care employed more people. Now, by some estimates, a quarter of retail jobs are in limbo or have permanently disappeared. More are likely to follow.
Appliance chain Best Buy has laid off 51,000 hourly workers from its 125,000-person labor force; the cut encompasses almost all part-time employees.
The Federal Reserve said businesses in the aggregate have indicated that they expect economic conditions to worsen and will lay off more workers in the weeks ahead.
That outlook is underscored by the number of retail chains not making their rent payments.
Dick’s Sporting Goods, Petco, Staples, and Victoria’s Secret are among the major retail chains that, as of 14 April, had not paid their rent for the month.
Mall owners with “essential” tenants such as grocery stores and pharmacies have collected as much as 60 percent of their April rents within the usual two-week grace period at the beginning of a month, according to Marcus and Millichap, a real estate consulting firm.
Malls with a greater concentration of “non-essential” stores such as jewelers or fashion boutiques collected an average of no more than 25 percent, the consulting firm reported.
Many commercial landlords have expressed willingness to work with locally-owned businesses that have been financially damaged by the economic shutdown.
But many also are less patient with large chains that landlords believe could pay but are choosing not to as part of a strategic decision to hoard cash as long as possible.
Staples has halted rent payments, saying the chain has suffered a severe drop in sales; landlords say competitor Office Depot has continued to pay its rent. Petco has stopped paying rent, citing the need to pay employees and the high cost of keeping stores hygienic; landlords say rival chain PetSmart has paid its stores’ rents.
Some landlords are threatening to declare the chains in default of their leases and begin legal proceedings.
A few chains have countered by claiming the economic shutdown is a “force majeure,” an event beyond their control that relieves them of meeting contractual obligations.
Smaller retailers are facing even longer odds. A majority of stores employing 12 or fewer people report having less than one month’s cash on hand. Two-thirds of small business owners can endure a crisis that lasts a month, according to a recent survey; only a third said they could survive a four-month lockdown.
“The good news is that we will come out of this with some degree of pent-up demand,” said Ellen Zentner, Morgan Stanley’s chief U.S. economist. But there “are a lot of caveats,” she added.
TREND FORECAST: Unsold goods in a frozen economy with massive unemployment will lead to falling prices or deflation. While a little deflation is good for consumers and can help clear unsold inventory, demand will remain weak as unemployment rises and debt burdens weigh down consumers.
In fact, “yard sales” will proliferate across the nation as consumers sell off what they no longer “must have” to raise money as the “Greatest Depression” sinks them deeper into poverty.
