US retail posted promising growth in September

  • US retail saw its sales growth increase 5.4% year over year in September on a seasonally adjusted basis
  • This suggests the industry could improve despite the lack of a new government stimulus bill. 
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The industry, which was hit hard early on in the pandemic, saw its sales growth increase 5.4% year over year (YoY) in September on a seasonally adjusted basis, per estimates from the US Census Bureau.

This marks the retail industry's fourth consecutive month of positive seasonally adjusted sales growth after posting negative growth in March, April, and May due to the pandemic, and is an acceleration from its 2.8% YoY growth in August. But the recovery doesn't appear to be uniform across the industry: Some segments posted major sales growth numbers in September, like nonstore retail, which includes ecommerce and turned in 23.8% YoY growth, while areas including clothing continue to report annual negative growth figures.

Retail's strong performance may mean that its recovery will be resilient even if there's no new stimulus package—which bodes well for retail and payments firms as the holidays approach.

  • There have been concerns that consumers would pull back on their spending without a new stimulus package, but the September retail figures suggest that won't be the case. Consumers started receiving stimulus funds in April as well as access to expanded unemployment benefits through July—and spending could've dipped in September since consumers hadn't received such aid recently. But September's retail sales growth could mean that retail will continue to recover even if there's no new stimulus package, which is important as the future of legislation that would introduce new aid is unclear.
  • Retail's ability to continue on an upward trajectory is key since the holidays are a major volume driver for merchants, card networks, and issuers. After a difficult few months due to the pandemic, a variety of companies may be hoping their Q4 performances, and more specifically the holiday season, can bolster their results for 2020. And considering Amazon's Prime Day appears to have successfully brought in billions of dollars in sales again, firms may already be seeing strong performances as holiday shopping kicks off—especially online given the strength of nonstore retail sales.

But retail and payment firms' Q4 could still be at risk as consumers run out of funds and coronavirus cases pick up. While retail's performance is on the upswing, it's possible consumers will eventually pull back on spending as they run out of funds from the stimulus and expanded unemployment benefits. This risk may be why Walmart CEO Doug McMillon implored US Congress to pass a new stimulus bill in the near future, especially since Walmart noted the initial stimulus payments boosted its sales.

And with the number of coronavirus cases rising in the US, state and local governments could eventually choose to restrict and close nonessential businesses as they did earlier on in the pandemic, cutting into consumers' income and spending opportunities as well as hurting merchants', card networks', and issuers' volume despite retail's promising recovery.

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