Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

U.S. retail sales suffered a record drop in March and output at factories declined by the most since 1946, buttressing analysts’ views that the economy contracted in the first quarter at its sharpest pace in decades as extraordinary measures to control the spread of the novel coronavirus shut down the country.

The reports on Wednesday came as millions of Americans have been thrown out of work, and were the most solid pieces of evidence yet that the economy was in deep recession and potentially at risk of a depression. States and local governments have issued “stay-at-home” or “shelter-in-place” orders affecting more than 90 per cent of Americans to curb the spread of COVID-19, the respiratory illness caused by the virus, and abruptly stopping economic activity in the country.

“Economists have long imagined over the years what a new Great Depression would look like, but today they can stop thinking about it,” said Chris Rupkey, chief economist at MUFG in New York. “Things will plainly never be the same again for consumers and factories where everyone in the country will have to make do with less.”

Story continues below advertisement

Retail sales plunged 8.7 per cent last month, the biggest decline since the government started tracking the series in 1992, the Commerce Department said. Data for February was revised slightly up to show retail sales slipping 0.4 per cent instead of falling 0.5 per cent as previously reported. Economists polled by Reuters had forecast retail sales tumbling 8.0 per cent in March. Compared to March last year, retail sales dropped 6.2 per cent.

The $46.2 billion decrease in sales in March was almost equal in a single month to the $49.1 billion peak-to-trough decline that unfolded over 16 months in the Great Recession.

The Federal Reserve said on Wednesday in its April “Beige Book” report of anecdotal information on business activity collected from contacts nationwide that “economic activity contracted sharply and abruptly across all regions in the United States as a result of the COVID-19 pandemic.”

The Commerce Department’s Census Bureau, which compiles the retail sales report said though “many businesses are operating on a limited capacity or have ceased operations completely,” it had “determined estimates in this release meet publication standards.”

Last month’s decrease in retail sales reflected depressed receipts at car dealerships, with auto sales crashing 25.6 per cent. With millions at home and crude oil prices collapsing amid worries of a deep global recession, gasoline prices have dropped, which led to a 17.2 per cent decline in sales at service stations.

In addition, the closure of non-essential retailers knocked sales at clothing down 50.5 per cent last month. Receipts at furniture stores collapsed 26.8 per cent and spending at sporting goods, hobby, musical instrument and book stores plunged 23.3 per cent. Sales at electronics and appliance stores decreased 15.1 per cent.

There were also steep declines in receipts at restaurants and bars, which stopped in-person service and moved to take-out and delivery service. Though some businesses, including restaurants, have shifted to online sales, the volumes were insufficient to close the gap from social distancing measures.

Story continues below advertisement

Sales at restaurants and bars dropped 26.5 per cent last month.

STRONG GROCERY STORE SALES

The drag on sales from social restrictions far outweighed a 3.1 per cent surge in receipts at online retailers like Amazon, and grocery stores and pharmacies as consumers stocked up on household essentials such as food, toilet paper, cleaning supplies and medication. Grocery store sales soared 26.9 per cent and receipts at healthcare outlets jumped 4.3 per cent. Sales at building material stores rose 1.3 per cent.

Stocks on Wall Street fell, with the S&P 500 recoiling from a four-week high, on the raft of weak data and dismal first-quarter earnings reports. The dollar was trading higher against a basket of currencies. U.S. Treasury bond prices rose.

Excluding automobiles, gasoline, building materials and food services, retail sales increased 1.7 per cent in March after a downwardly revised 0.2 per cent drop in February. These so-called core retail sales were previously reported to have been unchanged in February. Core retail sales correspond most closely with the consumer spending component of gross domestic product.

Despite March’s increase in core retail sales, economists are forecasting consumer spending plunging at an annualized rate of at least 17.0 per cent in the first quarter, which would be the weakest performance since record keeping started in 1947.

Consumer spending accounts for more than two-thirds of U.S. economic activity. It grew at a 1.8 per cent pace in the fourth quarter, with the overall economy expanding at a 2.1 per cent rate over that period. Economists see no respite for consumer spending in the second quarter, with estimates as deep as a 41 per cent rate of decline, despite a historic $2.3 trillion fiscal package, which made provisions for cash payments to some families and boosted unemployment benefit checks. About 16.8 million people have filed claims for unemployment benefits since March 21.

Story continues below advertisement

Another report from the Fed on Wednesday showed manufacturing production plummeted 6.3 per cent last month, the biggest decrease since February 1946.

A fourth report from the New York Fed showed factory activity in New York state slumped to a record low in April.

With March data coming in severely weak, economists are estimating the economy contracted at as much as a 10.8 per cent rate in the first quarter, which would be the steepest drop in gross domestic product since 1947.

First-quarter GDP will also take a hit from an inventory drawdown as the coronavirus depresses imports.

Economists believe the economy entered recession in March. The National Bureau of Economic Research, the private research institute regarded as the arbiter of U.S. recessions, does not define a recession as two consecutive quarters of decline in real gross domestic product, as is the rule of thumb in many countries. Instead, it looks for a drop in activity, spread across the economy and lasting more than a few months.

“The economy is almost in free fall,” said Sung Won Sohn, a business economics professor at Loyola Marymount University in Los Angeles. “We will see the bottom when the coronavirus infection rates stabilize. It’s going to be a pretty deep bottom from which to come up.”

Story continues below advertisement

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies