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Direct payments to household a boost for U.S economy

The jury is still out on whether or not the federal government will push through another stimulus package to address the most pressing concerns facing the U.S. as a result of the ongoing coronavirus pandemic.

There is a great deal of uncertainty around when this second check will be approved, and if it will come in time to help those in the greatest need. And, while negotiations over another stimulus package continue, there is some hope that a bill could pass before the November election, though others in Washington have expressed their doubts.

Part of the stimulus package announced earlier this year, the Coronavirus Aid, Relief and Economic Security (CARES) Act provided income-eligible taxpayers with a $1,200 check or $2,400 for couples. Families with dependent children received an extra $500, and the first direct-deposited checks arrived mid-April.

In the most recent update, the Senate had failed to move a Republican bill forward, which included $500 billion of new aid. Still, the bill did not receive the 60 votes needed to pass in the Senate with the package aiming to provide $300 per week in enhanced unemployment insurance benefits.

The Republican bill defeated would have renewed a federal unemployment benefit, but at a lower level than Democrats sought. It also would have set new protections for businesses against lawsuits during the pandemic.

Other initiatives - including aid to state and local governments, the second round of direct payments to households, and bailouts for airlines - were not addressed in the Republican bill.

But, did this first direct payment to households do what it was intended to do – stimulate the U.S. economy? If you ask the world's largest retailer, Walmart U.S. CEO John Furner, who oversees more than 4,700 stores, says the answer is a resounding yes.

According to the retailer, categories like sporting goods and bicycles, fabrics and crafts, toys, the stay-at-home categories, networking equipment, saw a surge in sales following the release of the first check.

Walmart executives added that same-store sales improved 9.5% and they have attributed the boost, in part, to the first stimulus check recipients. The boost, however, started to dip in July as shoppers had spent this cash but were still more than 4% — higher than many quarters before the pandemic began.

In terms of retail, Walmart was not alone in reporting to have benefited. Brian Cornell, Target's CEO, saw a noticeable increase in clothing and cosmetics spending thanks to the extra money in shoppers' pockets. Apple CEO Tim Cook told analysts the tech company saw an overall uptick in the second half of April, at least in part due to the stimulus money. Corie Barry, Best Buy's CEO, reported to analysts that the company saw a definite increase in sales at the end of April, particularly during the last three weeks of the quarter. Lowe's CEO Marvin Ellison said the do-it-yourself retailer also saw indications that checks boosted sales of home improvement items.

"Across our clients, Open Oceans has seen the impacts of the stimulus as well. Particularly in the consumer goods segment, we saw upwards of 30% sales growth from April to May as the stimulus started to take effect. With more disposable cash in consumers' hands, we saw significant increases both in the volume of sales and in people's propensity to convert off of ads. We are optimistic that the federal government will pull together on another consumer-focused stimulus as this is clearly the best way to support business and mitigate the economic effects of the pandemic."


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