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Posted on Tuesday, March 17th, 2020 By Martin Crutsinger And Anne DâInnocenzio, AP Business Writers
WASHINGTON (AP) â Retail sales fell 0.5% in February, the largest drop in more than a year, indicating that the consumer sector was slowing even before the coronavirus struck with force in the United States. Economists said they were looking for even weaker numbers in coming months.
The Commerce Department reported Tuesday that the February drop in sales was the biggest since a 2% decline in December 2018. Sales had been up 0.6% in January.
The February decline came from weakness in a number of areas including a 0.9% fall in auto sales and a 2.8% drop at gasoline stations, a decline that reflected falling gas prices.
Excluding motor vehicles and parts, retail sales were still down a sizable 0.4%.
In a likely sign of things to come, online sales showed a solid gain of 0.7% in February. Economists are forecasting even bigger demand in this area as Americans heed warnings to limit activities outside the home to try to halt the spread of the virus.
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âWith virus fears escalating drastically, containment measures being stepped up and high-frequency data showing that consumers are already avoiding public places like restaurants and cinemas nationwide, it looks likely that retail sales will fall sharply in March,â said Andrew Hunter, senior U.S. economist at Capital Economics.
The retail sales report doesnât cover the past week when the U.S. economy shuddered to a near-halt, the Dow Jones plummeted to new lows and scores of iconic chains like Nordstrom and Abercrombie & Fitch announced that they are temporarily shuttering to curb the spread of the coronavirus.
While discounters and grocers like Walmart, Target and Costco have seen long lines of customers wanting to stockpile groceries, many mall-based clothing stores have seen a drop-off in customer traffic.
Economists believe that the hit to consumer spending, which accounts for 70% of economic activity, will be enough to push the country into a recession.
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âDisruptions from the coronavirus will bring the economyâs main engine (consumer spending) to a halt,â economists at Oxford Economics said in a research note. âAgainst this backdrop, a U.S. recession is now unavoidable.â
Nordstrom became the first department store chain to announce that it would temporarily close all 380 stores, including 116 department stores. It said it was calling off its annual financial guidance, noting a slowdown in consumer demand, particularly in areas impacted by the coronavirus.
Deborah Weinswig, CEO of Coresight Research, a global research firm, said that she now expects 15,000 stores to close in 2020, nearly double her forecast of 8,000 stores that she made earlier this year. She says she expects that retailers could be closed for three months, not just two weeks.
âWe are in a sustained spending halt,â she said.
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Anne DâInnocenzio contributed to this report from New York.
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