Significant job declines, health and safety issues, and government-mandated store closures created a whirlwind year for retail in 2020. In spite of 2020's obstacles, total advanced retail and food service sales grew by 4% from the prior year, which was supported by government-aid payments to consumers in the form of enhanced unemployment benefits and economic impact payments. This fueled the economy's momentum going into the new year. January retail sales momentum carried over as sales exceeded expectations. But progress slowed in February as a result of inclement winter weather and unpreceded snow storms as sales were toned down a little. Retail sales declined in February to $561.7 billion, a decrease of 3% from January's figures and the personal savings rate declined by 630 basis points (bps).
With the approval of the $1.9 trillion American Rescue Plan Act and distribution of $1,400 economic impact payments beginning in March, February should prove to be a minor glitch as it pertains to retail in the long-run as March is likely to indicate an increase in spending, savings and income. With the arrival of spring and warmer weather, increased daily vaccinations (average 3 million daily, CDC), and easing of pandemic-related restrictions, retail and the economy are positioned for growth in 2021. The combination of consumption representing about 70% of GDP, build-up consumer demand, consumer purchasing power, and getting back to more normal economic activity should be the propulsion system for increased growth rates in the economy and retail sales.
It appears that consumers are yearning to return to traditional norms and spend money in restaurants, stores, bars, sporting events, etc. as quarterly e-commerce sales continued to decline each quarter after Q2 2020. Nevertheless, considering the pandemic's impact on consumers' travel arrangements, limiting dinning out, and entertainment and sporting event retail experiences, as consumers resume those activities, when safe, retail and food service annual growth rates and retail and food service sales have the possibility to reach new heights as consumers certainly hold a commanding position in propelling the economy forward in 2021.