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Retail Sales in 2021 Up 8% Compared to 2019

Intelligent Economics > Analysis > Retail Sales in 2021 Up 8% Compared to 2019

Retail sales for the month of March 2021 in Puerto Rico totaled $3.158 billion. Compared to the previous month of February, sales increased by $572 million, or 22.2%. When compared to March 2021, retail sales increased by $1.104 billion, or 53.8%.

Our firm’s usual analysis methods rely on year over year comparisons as well as month over month comparisons to establish a reference point for sales. For this month the average for March 2019 will be used instead. March 2020 was when the first executive order establishing COVID restrictions was enacted. As such, sales for many categories plummeted, as non-essential retailers were not allowed to reopen. A comparison with March 2019 allows us to see how close retailers are to recovering from the blow inflicted on them by the COVID-19 pandemic and also avoid any seasonal effects that could distort this analysis.

One of the categories with the largest increases relative to this period were supermarket sales. Their sales reached a total of $411 million, an increase of $139 million, or 51.2%. Supermarket sales increased dramatically at the beginning of the COVID pandemic and have remained at elevated levels since.

With restaurant sales for March 2021 matching their March 2019 total, a decline in supermarket sales would be expected. However, March coincided with the disbursement of $177 million in SNAP (PAN) funds for students on the island[1]. This additional funding reached a total of 336,000 public school students. This temporary increase in SNAP funds led to an overall increase in food sales on the island. Combined supermarket, special food stores, and restaurants sales reached a total of $609 million in March 2021. Compared to March 2019, food retail sales overall increased by $151 million, or 33.2%. This increase being nearly identical to the increase in SNAP funds shows the impact that this increase in federal funds arriving in Puerto Rico has had. 

A concern regarding supermarket and food sales on the island has been inflation. Real supermarket retail sales in 2006 dollars have also shown an increase since the beginning of the pandemic. The inflation adjusted increase in supermarket sales in recent months shows that increases in supermarket sales have not been due to increasing food prices, although these have in fact played a factor. This sustained increase in sales has been due to economic stimulus in the form of increased unemployment and SNAP benefits.

Compared to March 2019, total retail sales increased by $567 million, or 21.9%. Using 2006 dollars, which is the benchmark used by the Puerto Rico Department of Labor, it is possible to adjust sales to take inflation into account. We find that inflation has not played a significant role in this increase. Real (adjusted for inflation) total retail sales increased by 41%. Since this increase in retail sales seen in the past months has not corresponded with a return to pre-pandemic employment or overall levels of economic activity, this would imply that economic stimulus on the island in the form of increased unemployment insurance benefits and direct payments to citizens has been the main engine behind increased sales.

This increase is evident in retail sales since the most restrictive COVID measures were lifted in June of 2020. Since then, retail sales have averaged $2.865 billion each month. Monthly retail sales for the 10-month period between May of 2019 and February of 2020 reached an average of $2.5 billion. This $358 million increase in average monthly retail sales has not been based on any sort of sustainable economic growth or increase in employment relative to 2019.

Another factor to consider in retail sales is how different sizes of retailers have fared. The increase in retail sales relative to March 2019 has not been distributed equally. Larger retailers have had larger increases in sales relative to small and medium retailers. Since larger retailers are oftentimes more able to absorb increases in costs, the pandemic has had a negative effect on smaller retailers.

Retail sales for the calendar year to date have totaled $8.639 billion, an increase of 26.9% relative to 2020. This increase was expected. When comparing the first quarter of 2021 to the first quarter of 2019, retail sales have caught up to and surpassed pre-pandemic totals by $641 million, or 8%.

This increase is not sustainable and as has been outlined, is based on federal fund assignments that are non-recurring. By the end of 2021, the return to lower levels of unemployment and SNAP benefits could potentially lead to lower sales relative to 2019 if economic activity and overall employment do not return to pre-pandemic levels.

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