Consumer prices posted their biggest drop in five years as the coronavirus pandemic suppressed demand for goods and services.
According to the Labor Department, the consumer-price index fell a seasonally adjusted 0.4% in March — the largest monthly decline since January 2015. (For comparison, it rose 0.1% in both February and January.) The number was roughly in line with economists’ forecasts for the month, which saw a nationwide lockdown that led to a plunge in the costs of gasoline, hotel accommodations, airline tickets and apparel.
The report released today showed a 12.6% drop in categories associated with travel and transportation, as state governments imposed restrictions on people’s movement. The social-distancing limitations forced so-called “nonessential” retailers to cut back on open hours or eventually shutter their doors for the time being; as such, apparel dipped 2% last month after rising in each of the prior four months.
The Labor Department noted that its data-gathering for March was impacted by temporary closures or reduced business operations. Its ability to collect information via personal visits to stores was halted on March 16.
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The figures were released two days after a Fitch Ratings report suggested discretionary spending was already being “adversely affected,” and the increased likelihood of a downturn could extend well into 2021. It projected that retail sales could decline up to 50% in the first half of 2020, with a slow rate of improvement through the summer if stores begin reopening in mid-May or early June. It also forecasted sales to be down mid- to high single digits in the second half of the year, while sales in 2021 could plunge 8% to 10% from 2019 levels.
It remains to be seen whether consumers will be able to return to pre-coronavirus shopping habits following months of disruption and panic-buying. Many retailers have thrown their resources behind e-commerce as brick-and-mortar closures extend through the end of the month — although a number have expressed worries that online gains won’t be enough to replace physical store sales.
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