PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Retail Sales Dropped in February

By at 16 March, 2021, 12:05 pm

by Raymond J. Keating-

After a nice jump in January, retail sales declined in February, according to the latest report from the U.S. Census Bureau.

Specifically, after a solid increase in January broke a string of monthly declines, the advance estimate for retail and food services sales in February dropped by 3.0 percent. With the 7.6 percent increase in January, sales in the first two months of 2021 were still up notably.

Source: Federal Reserve Bank of St. Louis, FRED

However, the fact that sales were off markedly in February, and down in nearly all major sectors except for gasoline stations, cannot simply be ignored.

There is an assumption at work that another round of upcoming government aid checks and expanding vaccinations point to robust retail sales in the months ahead. And to a certain extent, that is reasonable.

But it needs to kept in mind that government checks handed out in tough times tend not to get spent to the extent that those pushing for such measures assume and assert. After all, people recognize uncertainty and troubles, and in turn, tend to hunker down until matters improve. Increased vaccinations will help to diminish uncertainties and concerns, which will, in turn, aid retail.

However, the potential for new uncertainties and risks exist, in particular, the emerging talk about the need for major tax increases. Reining in government spending and debt promise to be mighty tasks in coming months and years. That effort will be undermined by policy measures, such as tax increases, that undermine growth.

Strong economic growth will be essential in reducing the size of government. And economic growth overall, including retail sales, are dependent upon recovery and expansion of entrepreneurship and investment. Policies that undermine such essential endeavors will undermine the economy for everyone.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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