WASHINGTON: Presi­dent-elect Joe Biden’s stimulus plan could spur hesitant US consumers to start spending again, analysts said on Friday, as the government reported falling sales in December, but they warned it may not be enough to overcome surging coronavirus cases.

Biden on Thursday unveiled a $1.9 trillion package aimed at getting the world’s largest economy back on its feet after business shutdowns to stop Covid-19 caused a massive downturn in 2020.

The package, dubbed the American Rescue Plan, would raise the minimum wage to $15 an hour, fund struggling state and local governments, send larger stimulus checks to consumers and pay for a renewed testing and vaccination assault on the coronavirus.

Those provisions could help return shoppers to the struggling retail sector, where the Commerce Department said Friday sales fell 0.7pc during the December holiday season as even booming e-commerce outlets did less business.

“President-elect Biden’s ambitious fiscal agenda could further juice up household spending during the delicate vaccine rollout phase. Thereafter, consumers’ mood should revive as herd immunity comes within reach and further fiscal aid is delivered,” Lydia Boussour of Oxford Economics said.

But with Covid-19 cases still at worrying levels across the economy, Ian Shepherdson of Pantheon Macroeconomics feared that even Biden’s massive plan won’t be enough to lure people back to stores.

“We expect consumers’ spending to struggle until falling Covid cases allow restrictions to be eased, starting in March. We think most of the next round of stimulus payments, proposed yesterday by Presi­dent-elect Biden, will be saved,” Shepherdson said.

The retail sales data follows recent Labour Department statistics showing weekly claims for new unemployment benefits increasing, and the economy shedding jobs in December.

Biden’s proposal would cushion the blow for the unemployed by increasing the amount of weekly payments and lengthening their duration, while also raising stimulus payments included in a December measure to $2,000 from $600.

But the package’s prospects in Congress, which is controlled only narrowly by Biden’s Democrats, are unclear.

Party leaders have promised they’ll act on the proposal swiftly, but at least one key senator has expressed reservations about its provisions.

The National Retail Federation industry group sounded a positive note.

Published in Dawn, January 16th, 2021

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