By Lenore Fedow
U.S. retail sales were down 8.7 percent in March, according to data from the U.S. Department of Commerce.
New York—The numbers are troubling, but not surprising.

According to data released by the U.S. Department of Commerce Wednesday morning, U.S. retail sales were down nearly 9 percent month-over-month in March as COVID-19 precautions forced businesses to close and kept consumers at home.

It is the biggest decline since the department began keeping track in 1992 and surpassed the 8 percent decline economists had expected.

In a note to clients last week, financial services provider Nomura said sales would likely be weaker toward the end of the month when many states established stay-at-home orders.

“This suggests April’s numbers will likely be even worse,” said Nomura.

Credit Suisse economist James Sweeney echoed that prediction in a note released before the March data, stating that March may be the beginning of a “recessionary decline” in consumption that could get worse in April.

“Overall, we expect consumption to fall by 17.5 percent quarter-over-quarter annualized in Q2, the worst quarter since WWII,” the economist wrote.

In a Credit Suisse podcast last week, Sweeney looked at the converging factors that resulted in a shock to the system for the U.S. economy: a simultaneous drop in supply and demand combined with supply chain disruption.

“If the government orders certain forms of economic activity, whether it’s factories or restaurants, to temporarily shut down because of an attempt to limit contagion from COVID-19, that’s essentially a supply shock.”

“If at the same time, existing businesses and existing households choose not to spend money, not to invest, not to buy big-ticket consumer items, that’s a demand shock.”

The spike in unemployment could depress demand even more, he added.

Another 6.6 million people filed for unemployment benefits in the week ending April 4, according to the U.S. Department of Labor’s report, in addition to the 6.6. million claims filed the previous week.

It was the second-largest number of initial unemployment claims since the department began keeping track in 1967.

Sweeney expects U.S. unemployment claims will drop when the shutdowns are over, but the long-term recovery for the labor market may be slow.

“I think it’s going to come back rapidly, but I don’t think it’s going to get close to the pre-crisis level. It’s going to spend the next 18 months grinding toward the pre-crisis level,” said Sweeney on the podcast.
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The silver lining for retailers may be the one-time checks to individuals as part of the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act.

“If we get through this quickly enough and this extra cash that the government has put in private sector hands is still around, which is likely, then maybe you get some stimulus,” said Sweeney.

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