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Can Stimulus Checks Help Resurrect Retail?

[Updated: Mar 24, 2021 ] Mar 24, 2021 by Maurie Backman
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Retailers took a massive hit in 2020 when coronavirus restrictions forced stores to temporarily shutter, and economic woes caused a general pullback in spending even once stores were able to open again. But things picked up in January in a very meaningful way. Retail sales grew by 7.6%, well surpassing analysts' bet of 1% growth.

And the reason for that surge? Stimulus checks.

In late December, a second coronavirus relief bill was passed that paid eligible Americans $600 apiece, and many people took that money and pumped it back into the economy.

Unfortunately, retail sales dipped in February as those stimulus funds ran out and weather-related disruptions wreaked havoc on much of the country. All told, retail sales declined 3% last month. And while that's definitely not the best of news, it's also not necessarily a reason for retailers to lose hope.

A third round of stimulus checks could revive retail

In mid-March, President Biden signed a sweeping $1.9 trillion coronavirus relief package into law, and it includes a third round of stimulus checks, this time worth $1,400 apiece. The one difference is that eligibility for third-round stimulus checks is lower than what it was for the first two rounds, but even so, the majority of people who received stimulus checks in 2020 are eligible for a third payment.

Those eligible for direct deposit may already be sitting on their stimulus funds. Physical checks and debit cards loaded with stimulus funds, meanwhile, will be arriving in batch payments throughout the latter part of March into April, as the IRS can only issue so many at once. But all told, Americans are getting a huge influx of cash, and there's a good chance they'll end up spending at least some of it at retailers in the coming weeks. As such, there's reason to believe retail sales could pick up at the end of March, and April's numbers may be even higher -- especially given the fact that stimulus recipients are looking at a lot more money this round than they received from December's round.

Of course, a surge in sales isn't just good for retailers themselves -- it's also positive news for malls. Many well-known retailers have closed stores, or are making plans to do so, in the wake of the pandemic, and malls have reached a point where they can't afford to lose any more tenants. If sales numbers improve in the course of spring, it could prevent additional closures and help mall real estate investment trusts (REITs) retain their value, or perhaps get a much-needed boost.

The fact that vaccine distribution has also picked up could also, in conjunction with stimulus checks, help retail sales climb. If consumers aren't fearful to shop at stores, they'll be more likely to walk in and make impulse purchases -- buys that might be bad for individuals' budgets but a boon to retailers. As such, there's reason to be hopeful that 2021 won't be nearly as devastating a year for retailers as 2020 ended up being.

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