For the first time since spring, U.S. retail sales have declined, raising questions about the strength of consumer spending and how retailers will fare in the all-important holiday shopping season.
Retail sales fell 1.1 percent in November as spending on categories like automobiles, electronic stores, clothing and restaurants and bars softened, according to a report from the Commerce Department on Wednesday.
The tumble came as the October retail sales increase was revised down to a 0.1 percent decline. Economists had expected a smaller decline for November amid robust holiday sales, driven by online spending.
The U.S. economy has slowed in recent months amid a surge in coronavirus cases and a steady increase in the ranks of the unemployed. Even as businesses have come under fresh pressure, lawmakers have yet to reach an agreement on a new stimulus package.
The uncertainty around holiday spending has been exacerbated as retailers pushed annual sales events into October, in a bid to jump-start the season and prevent crowded stores and shipping delays in November. Many major chains reported sales gains in October, but they were not certain about how it would affect spending in November and December.
Black Friday, which has traditionally signaled the start of the holiday shopping season, was also largely a bust for many retailers amid the rise in cases. Some companies reported that in-person traffic that day declined by as much as 50 percent from last year, as shoppers concerned about the virus stayed away from the stores.
With the new concerns around shopping in person, retailers have been racing to accommodate a surge in shipping demand, grappling with new surcharges and delays with major carriers including UPS and FedEx.
By: Ella Koeze·Source: Refinitiv
A surprisingly dour report on retail sales took some of the enthusiasm out of the stock markets on Wednesday.
Shares in Europe and the United States had been heading for a second day of solid gains before the Commerce Department said that retail sales fell 1.1 percent in November, a far sharper decline than economists had expected and fresh evidence of the resurgent coronavirus’s impact on the world’s largest economy.
Instead, the S&P 500 started the day with a small decline, and shares in Europe were also off their highs of the day. The Stoxx Europe 600 index and the FTSE 100 in Britain were both about half a percent higher.
Before the retail sales report, markets had been bolstered by signs of progress toward an economic stimulus package in Washington, and after the latest Purchasing Managers Index report offered a positive outlook on the European economy. The manufacturing index reached 56.6 points, up from 55.3 in November, and the composite output index hit 49.8 points, from 45.3 last month.
“The data hint at the economy close to stabilizing after having plunged back into a severe decline in November amid renewed Covid-19 lockdown measures,” said Chris Williamson, the chief business economist at IHS Markit, which compiles the reports.
Further insight on the state of the U.S. economy will come later on Wednesday when the Federal Reserve chair, Jerome H. Powell, speaks to reporters after the end of the central bank’s final scheduled meeting of the year. The Fed has been offering reassurance that it will continue supporting the economy, but some policymakers are divided over how much needs to be done now.
U.S. lawmakers held talks late Tuesday seeking an agreement on a pandemic stimulus bill ahead of a Friday deadline. Senator Mitch McConnell, the majority leader, said afterward that “we’re making significant progress,” and Speaker Nancy Pelosi offered a similar appraisal. On the table is a package of funding to support unemployed workers and troubled businesses, as well as an omnibus spending bill to keep government money flowing.
The European Central Bank said Tuesday that it would allow banks to resume limited payouts to shareholders, an indication that regulators are slightly less worried that the pandemic will set off a financial meltdown.
Since March, the central bank has been pressuring commercial banks to stockpile cash to deal with possible losses stemming from the devastating impact on the eurozone economy caused by the pandemic.
Banks can begin paying dividends again after consulting with regulators, the European Central Bank said in a statement on Tuesday, but it set strict limits on how much they can pay out as a percentage of profit and capital. The limits will remain in effect until at least the end of September 2021.
Still, the end of the dividend moratorium, which was technically a recommendation, is a sign that the banking system and the eurozone economy are inching toward normalcy.
“In revising its recommendation, the E.C.B. acknowledges the reduced uncertainty in macroeconomic projections,” the central bank said. An analysis earlier this year “confirmed the resilience of the European banking sector,” it said.
The economic crisis has forced most banks to set aside large sums to cover losses from borrowers who lost their jobs and businesses that suffered severe declines in sales. But there have been no major bank failures as a result of the pandemic, in part because regulators have forced lenders to stockpile capital in recent years and take less risk.
The central bank said that lenders should discuss dividend payments with regulators beforehand, and it cautioned banks to exercise “extreme moderation” in bonuses and other payouts to executives.
The European Central Bank is responsible for supervising banks in the eurozone that are considered big enough or important enough to set off a financial crisis. The bank said Tuesday that national regulators should apply the same standards to the smaller banks under their purview.
Almost from the moment the pandemic spread across the United States, advocacy groups have warned that the economic fallout could cause mass displacement of low-income tenants.
In response, more than 400 state and local governments have used money from the federal CARES Act to set up funds to cover at least $4.3 billion in rental assistance — money that has helped tenants pay their bills and landlords stay current on their mortgages, according to a database set up by the National Low Income Housing Coalition, a policy group.
But many jurisdictions are reporting trouble spending it, and with barely two weeks left in the year, they are on pace to have more than $300 million left over, according to the coalition’s database. In a pattern that predated the pandemic, the programs have been complicated by bureaucratic hurdles, competing budget demands and a reluctance among landlords to take part, reports Conor Dougherty for The New York Times.
Philadelphia is a case study in the simple-but-not-easy task of helping tenants with the rent. Social programs are often a partnership in which cities provide funding and lay out rules but delegate the execution to quasi-governmental nonprofit organizations like the one Gregory Heller works at.
Like most places, Philadelphia is not close to satisfying the need for help. But through rounds of rejiggering and three phases of funding — each with its own maze of rules and requirements — Mr. Heller’s group built a team to distribute aid, whittled down the processes that delayed it and concluded that the best way to help was the most straightforward: Give the money directly to renters.
“There’s a societal belief that poor people can’t spend money the right way, and I think it’s important to start questioning that assumption,” Mr. Heller said.
Until recently, the temperature-controlled storage and shipping of pharmaceutical products, known as the “cold chain,” was a relatively sleepy corner of the health care industry.
But the virus, and the temperature-sensitive vaccines that are poised to combat it, have brought new attention to the cold-chain delivery systems in the United States and beyond, Kate Kelly reports for The New York Times. Wall Street, which likes nothing better than a hot trade with the potential for big profits, is rushing to grab a piece of the action.
The companies getting attention from Wall Street are notable for how niche their operations are. Many use an elaborate network of freezers and specialized trucks and aircraft to move temperature-sensitive materials — such as blood, stem cells and tissue — around the world without compromising their efficacy. It’s a delicate process, because a product can go from vital to useless within minutes of being removed from cold storage.
Potential investors are constantly calling Stirling Ultracold, whose freezer equipment is powering UPS’s “freezer farms” in Louisville, Ky., and the Netherlands, where vaccines will be stored. “There’s not a day that goes by” that an inquiry doesn’t come in,” said Dusty Tenney, Stirling’s chief executive, who is running his Athens, Ohio, production lines around the clock.
Demand for Stirling’s freezer engines — the core component of their upright, under-the-counter and portable freezers — has soared, and the estimated waiting time for new orders is six to eight weeks, the company said. On Dec. 8, after multiple prospective investors studied the company’s financial metrics in a due diligence process, Stirling received a capital injection of an undisclosed amount that it planned to use to buy new equipment and expand production.
In October, Blackstone, the private equity giant, invested $275 million in Cryoport, a Nashville company that specializes in shipping sensitive medical materials at freezing temperatures. Investors have also been bullish on Ember, the beverage-heating company that has developed a refrigerated medical shipping box with built-in GPS and already counts two Jonas Brothers and the Brooklyn Nets forward Kevin Durant as shareholders.
Moët Hennessy, the premium spirits arm of French luxury giant LVMH Moet Hennessy Louis Vuitton, is taking a stake in WhistlePig, in a bet that it can make typically American rye whiskey a global hit, the DealBook newsletter reports.
It’s the second American whiskey brand that Moët Hennessy, has invested in after Washington’s Woodinville in 2017. Terms of the deal were not disclosed.
WhistlePig brews its Whiskey in Vermont oak, and its 15-year aged whiskey sells for more than $200 a bottle. The company was founded by Wilco Faessen, now a senior banker at Evercore, and Raj Bhakta, an entrepreneur and onetime “Apprentice” contestant.
Mr. Bhakta sold his shares in the company when Byron Trott’s investment firm, BDT Capital, took a minority stake last year. BDT will keep its stake following the deal, in which no investors cashed out. The deal with Moët Hennessy does not include a path to an outright sale, Mr. Faessen said.
Mr. Faessen said that formal talks about a partnership began in January, and the pandemic that did not alter the deal, besides lengthening the time it took to work through the details. Sales for both WhistlePig and Moët Hennessy came under pressure as bars and restaurants shut, but the companies also noticed a shift to premium liquor during lockdowns.
“It’s just easier to treat yourself when you’re stuck at home and sick of doing Zoom meetings,” said Jeff Kozak, WhistlePig’s chief executive, who noted that sales were up this year.
Rye whiskey is consumed mostly in the United States, but Moët Hennessy thinks it can entice drinkers elsewhere. Connoisseurs who want to “expand their repertoire in the category of high-end whiskies” have recently turned to Japanese brands, said Philippe Schaus, the Moët Hennessy chief executive, “and we don’t see why we will not succeed to bring them to high-end American whiskeys.”