U.S. Retail Sales Up in Advance of November 3 Election

Article

Date october 27, 2020

In the run-up to the 2020 election U.S. retail sales increased in September, according to the monthly Department of Commerce report. The September sales increased 1.9% from August amid a significant rise in COVID-19 cases nationwide and 5.4% from September 2019.[1]

Retail trade sales increased 1.9% from August and were 8.2% above last year, according to the monthly report. Non-store retailers were up 23.8% from September 2019, while building material and garden equipment and supplies dealers were up 19.1% from last year.

The department noted total sales for the July 2020 through September 2020 period were up significantly, 3.6% from the same period a year ago. Despite the September increase, spending in key sectors that suffered job losses during the pandemic, such as restaurants and clothing stores, remain well below last year’s levels.

The COVID-19 pandemic greatly altered the retail status quo in 2020 and what began as a supply crisis quickly evolved into demand crisis that is likely to continue through 2021. While consumer preferences are always changing, the pandemic is driving profound changes in retail behavior. As Gordon Brothers has recently examined, not only has the pandemic changed how consumers buy goods, it’s impacted what essential goods they spend their money on and shifted their spending preferences fueling strong revenues for retailers that support at-home habits.

Whether recent retail trends constitute secular shifts or short-term changes going forward, the upcoming U.S. election is sure to have an impact on consumers, retail and the economy. Gordon Brothers examines how election years, in addition to a pandemic, can impact consumer spending and retail sectors and how proposed policy changes could impact the ever-evolving retail space.

Consumer Spending Typically Dips Just Before Elections

Rarely has consumer spending dropped during a presidential election year. The last time spending dropped prior to the 2008 financial crisis was 1980, helping Ronald Reagan in his campaign against Jimmy Carter, the Democratic incumbent.

Although consumer spending was up in September and overall retail spending is now above pre-pandemic levels, the past two elections in 2016 and 2012 have shown a discernable dip in spending both two weeks before and during the week of the election. On average, there’s a 6% drop in year-over-year consumer sales during election week, which coincides this year with the race for holiday sales since the pandemic has pushed the start of holiday shopping earlier than ever before.[2]

Historically, most sectors from apparel to fitness and home and garden have seen sales dip during election week but rebound shortly thereafter; however, the pandemic has changed what Americans are doing with their free time and boosted revenues for home improvement, sporting goods and pet products retailers.

The dip worsened following the 2016 election and retailers lost an estimated $800 million in revenue from online sales between November 1 and November 14 in 2016. The most significant decline took place immediately after the election on November 8, 2016, as total sales growth lowered to 1.3%, versus the forecasted 7.8% growth.[3]

Conversely, food sales, donations, and publishing and entertainment sales have increased during election week during the past two elections.[4]

This year, only 40% of Americans say the election will impact which brands they shop with; however, politics has had increasingly more impact to retailer strategies with 90% of retailers making changes to how they market because of the 2020 presidential election.[5]

Current Retail Sector Trends and Pre-Election Sector Spikes

Over the past year, big ticket retailers like consumer electronics, automobiles and fashion have been negatively impacted as a result of the pandemic, and the uncertainty that’s come with it, since they are tied to discretionary spending. In addition to the negative impacts COVID-19 has had on big ticket retailers, uncertainty during this election likely won’t alleviate any of the current negative trends.

Similarly, box retailers continue to trend negative with brick-and-mortar stores and malls continuing to close throughout the U.S. Retail store closings in the U.S. reached a record in the first half of 2020 and the year is on pace for record bankruptcies and liquidations.[6]

Presidential elections, especially recent elections, have introduced more uncertainty to the market although food, groceries, fuel and basic clothing generally have remained protected from the uncertainty of ongoing pandemic and the upcoming election.

Like all general elections, the upcoming U.S. presidential election may temporarily shift certain retail market sectors. As seen in previous election years, guns and ammunition sales in the U.S. are increasing ahead of the November election. Since government contracts are an important demand driver and key to many manufacturers in the industry, anticipated policy changes of either presidential candidate can impact gun and ammunition sales pre- and post-election.

While the sale of guns and ammunition illustrate anticipation of a candidate’s policy changes, this year’s increase is also being driven by consumer concerns about protests and civil unrest and by Americans hunting as a socially distanced pandemic pastime. The go-to metric for gun sales is the number of federal background checks completed during a month since the number of guns sold isn’t directly compiled by the government. Background checks required by new gun buyers are well above 2016 levels since March of this year, according to monthly figures from FBI.[7]

Firearm Background Checks 2016 and 2020
All figures are based on data from the FBI’s National Instant Criminal Background Check System.

As the number of background checks from the sales of guns and ammunition increased in the run up to the 2016 election in anticipation of a Hillary Clinton presidency and the potential for more regulation. The eight years of Barack Obama’s presidency were a boom time for the gun industry as well because of stricter regulation. Once Trump was elected with a Republican majority in Congress, the threat of stricter regulation dissipated, and background checks dipped slightly in 2017.

Firearm Background Checks Year Over Year
All figures are based on data from the FBI’s National Instant Criminal Background Check System.

Despite sharp increase to certain retail sectors like guns and ammunition, real gross domestic product (GDP) growth over the previous 64 years that make up the past 16 presidential terms historically averaged 3.3% at an annual rate. But the average growth rates under Democratic and Republican presidents were different: 4.3% and 2.54% respectively.[8]

Second Stimulus Package Depends on Election Results

Looking ahead, no matter who is elected on November 3 both the Incumbent Republican candidate President Donald Trump and Democratic presidential nominee and former Vice President Joe Biden plan to invigorate America’s consumers. While they have contrasting ideological differences and visions for the future of the country, each candidate has spoken to a second stimulus relief package, which could impact retail and economic recovery.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law by President Trump on March 27, was the first major legislation the U.S. government passed to provide economic aid to people across the country as a result of COVID-19. Since then benefits have ended, and Democrats and Republicans have yet to reach a deal on another stimulus relief package. It’s unlikely to happen in advance of the November election and unclear if a second stimulus would provide retailers the same relief provided in the CARES Act.

A path forward for a second stimulus relief likely depends on who is elected. If President Trump is reelected, there’s a possibility Congress will come to an agreement on the top-line amount for a second stimulus relief. President Trump has supported a $1.8 trillion deal while House Speaker Nancy Pelosi has pushed for a maximum amount of $2.2 trillion.

If Joe Biden is elected, he could revisit the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, the Democrats’ follow-up plan to the CARES Act, that was introduced in May and passed by the House of Representatives a few days later. The HEROES Act proposes nearly $3.5 trillion in relief and includes about $1.13 trillion of emergency supplemental appropriations to federal agencies and economic assistance to governments at the state, local, tribal and territorial levels. After the bill's passage in the House, Republicans in the Senate called it "dead on arrival," saying it was unrealistic partisan offering.

The Health, Economic Assistance, Liability Protection and Schools (HEALS) Act is the Republican response to the Heroes Act introduced in July, but the legislation didn’t come all at once. Instead, a handful of Senators and committees published different outlines and bills, including a few items that predate the COVID-19 pandemic. The HEALS Act includes increased funding for hospitals, schools and higher learning institutions but would not provide additional funding for state and local governments short on tax revenue due to shutdowns and business closures and would also reduce expanded unemployment benefits from $600 per week to $200.

The continued stimulus delay leaves retailers uncertain about what to expect as they begin the holiday season following months of the pandemic’s impacts to sales. The NRF recently expressed concern over President Trump’s decision to stop negotiating with congressional leaders on new legislation intended to help the economy recover from the impact of the coronavirus pandemic. Additionally, more than 20 retail associations have joined the COVID Relief Now coalition and sent a letter to Congress urging immediate and meaningful economic support.

Conclusion

Regardless of the outcome, the 2020 U.S. election will have an impact on retail sectors, consumers and the U.S. economy in both the short and long term. According to the latest polling data available at the time of publication, Biden has an advantage over President Donald Trump nationally and in several key swing states.[9] But if the 2016 election taught Americans anything, it’s that polls may not always be accurate.

All plausible presidential and congressional election outcomes remain on the table for Biden, incumbent President Donald Trump and Congress. Among these outcomes, the biggest potential for government policy changes is a scenario in which Joe Biden is elected the White House and the Democratic Party gains control of both houses of Congress. Biden’s power to enact policies and measures relies in part on the Democratic control of the Senate.

The election and ongoing pandemic will impact consumer spending and sectors within the ever-evolving retail space over the next four years, but the economy and markets have shown they can adapt to new policy directions regardless of election outcome.

Related Articles

Pandemic Retail Trends Part III – Crisis-Driven Shifts – Rick Edwards and Liz Sarhaddi-Blue

Pandemic Retail Trends Part II - The Essential Goods Boom – Rick Edwards and Liz Sarhaddi-Blue

Pandemic Retail Trends, Part I - E-Commerce to the Rescue – Rick Edwards and Liz Sarhaddi-Blue

COVID-19: The Ails of Retail – Q&A with Liz Sarhaddi-Blue, Managing Director, Retail, and Tim Shilling, Managing Director, Retail.

What’s in Store for Post-COVID-19 Retail? – By Becky Goldfarb, Managing Director, Retail Valuations; Alex Sutton, Managing Director, Head of Research; Nick Taylor, Senior Managing Director, Retail.

Footnotes

[1] https://www.census.gov/retail/marts/www/marts_current.pdf
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[2] https://us.epsilon.com/resources/how-presidential-elections-impact-consumer-spending
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[3] Adobe Digital Insights: https://webcache.googleusercontent.com/search?q=cache:n8VJtcroUQ8J:https://cmo.adobe.com/articles/2016/11/2016-holiday-shopping-up-to-the-minute-data-from-adi.html+&cd=1&hl=en&ct=clnk&gl=us
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[4] https://us.epsilon.com/resources/how-presidential-elections-impact-consumer-spending
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[5] https://insights.retailmenot.com/blog/2020-retailer-playbook
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[6] Report from BDO USA LLP: https://www.bdo.com/insights/industries/retail-consumer-products/retail-in-the-red-bdo-bi-annual-bankruptcy-upd-(4)
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[7] Figures from both charts: https://www.fbi.gov/file-repository/nics_firearm_checks_-_month_year.pdf/view
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[8] https://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.20140913
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[9] https://www.realclearpolitics.com/epolls/latest_polls/
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