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Retail sales, Fed Chair Powell goes to Capitol Hill: What to know in the week ahead

The latest developments surrounding COVID-19 and its continued impact on the U.S. economy will take center stage in a busy week ahead.

April’s record plunge in retail sales. While COVID-19 likely put some pressure on consumer spending during May, economists predict online sales maintained their strength. Even spending in the beaten down core components are expected to have rebounded in May.

Economists surveyed by Bloomberg expect headline retail sales rose 7.4%, up from a 16.4% decline in April. Meanwhile, retail sales excluding the volatile auto and gas components likely jumped 4% in May, up from a 16.2% plunge in April.

“As many states continued to ease restrictions on resident mobility and nonessential business activity, various high-frequency estimates of consumer spending data indicated solid increases in major discretionary categories in May following historical declines in April,” Nomura economist Lewis Alexander said in a note June 12.

Alexander pointed out that, consistent with recent data from WardsAutos, sales at auto and auto parts dealerships likely rebounded double digits. However, spending at restaurants is expected to have rebounded only modestly, according to Alexander. “Although data from OpenTable, an online restaurant booking service, indicated some improvement in seated diner volume, sales at restaurants were likely weaker than the seasonal ramp-up in sales during late spring, weighing on the seasonally adjusted estimate.”

Credit Suisse economist James Sweeney argued that while retail sales in May will have rebounded from April’s sharp declines, the recovery will be gradual. “Consumer spending should start to recover in May as the country emerges from nationwide lockdown. However, the recovery will only be gradual as reopening happens in phases and consumer behavior shifts. With confidence still depressed and the labor market impaired, consumption is likely to take years to recover despite recent fiscal relief helping to support household income,” Sweeney wrote in a note to clients June 11.

Federal Reserve Board Chairman Jerome Powell testifies before the Senate Banking Committee in a hearing on the semi-annual monetary policy report to Congress on Capitol Hill in Washington, U.S., February 12, 2020. REUTERS/Yuri Gripas

Federal Reserve Chairman Jay Powell is scheduled to appear before the Senate Banking Committee on Tuesday and the House Financial Services Committee Wednesday for the semiannual monetary policy report to Congress. On Friday at 1 p.m. ET, Powell will be speaking during a virtual discussion on “Building a Resilient Workforce During the COVID-19 Era.”

latest interest rate decision and commentary regarding its policy path. The Committee signaled that it would not raise interest rates through at least 2022.

In the press conference following the rate decision, Powell stressed that the committee is “not even thinking about thinking about raising rates.” In a June 12 note, Capital Economics said, “Powell will reinforce the Fed’s dovish message in his semi-annual testimony to Congress.”

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@heidi_chung.” data-reactid=”53″>Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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