US retail sales in March plunge

US retail sales plunged 8.7 percent in March from a month earlier, the biggest decline since the government started tracking the series in 1992, as store shutdowns and job cuts caused by the coronavirus pandemic forced shoppers to cut back, the Commerce Department reported Wednesday.

Despite the overall decline in retail sales, online sales ticked up 3.1 percent. However, many chains, including Macy's and Best Buy, have closed their retail outlets during the outbreak.

Sales fell in broad categories, including clothes and electronics as well as big-ticket items such as furniture and cars. Sales also declined at restaurants and bars.

"The condition of the American consumer is impaired and will be for some time," Joseph Brusuelas, chief economist at RSM said Wednesday in a research note to clients.

Consumer spending represents about 70 percent of the $22 trillion US economy.

Economists surveyed by The Wall Street Journal expect the gross domestic product, the value of all goods and services produced in a year, to decline by 25.3 percent in the second quarter after a 3.3 percent dip in the first quarter.

But economists at JPMorgan expect the economy to fall 40 percent in the second quarter.

The record 11-year economic expansion continued in March, but ended abruptly by the end of the month when about 10 million applied for unemployment benefits as the economy halted amid government-imposed stay-at-home orders intended to curb spread of the coronavirus, the Labor Department reported.

Jon Hill, senior Treasury analyst at BMO, said the sharp decline in sales raises the possibility that a sharp recession could devolve into a depression. But he said the $2.2 trillion federal stimulus package and action taken by the Federal Reserve to cut interest rates and pump money into the economy could avoid disaster and help a rebound in the third quarter.

"It's really going to be not only a function of infections declining and whether there's a vaccine, but how will the economy be able to reopen and how quickly given the hit to the labor market," he told CNBC.

He said the current economic disruption is different from that caused by the collapse of the subprime housing market in 2008. As a result, prior rules and economic models may not accurately forecast what's ahead.

"These are very different types of recessions," he said. "One is a broader economic impact. This is a sudden stop. It's not surprising that things are economically skewed, but we're not playing by typical economic rules – we're playing by health policy rules."

Electronics retailer Best Buy said it will furlough about 51,000 hourly workers after it closed its US stores as part of the effort to contain the coronavirus. Sales fell about 30 percent in March from the same period a year ago.

The company employed about 125,000 full- and part-time staff on Feb 1. It plans to keep about 82 percent of full-time staff. Best Buy CEO Corey Barrie will take a 50 percent cut in salary and other top executives will cut their pay by 20 percent.