U.S. Retail Sales Rebound in Sign Consumer Weakness FadingBy
March advance of 0.6% exceeds median estimate of economists
Autos, health stores, furniture, electronics show gains
U.S. retail sales rose by more than expected in March in the first gain in four months, suggesting consumer demand regained steam on the back of tax cuts and refunds.
Receipts advanced 0.6 percent following a 0.1 percent drop in the previous month, according to Commerce Department figures released Monday. That compared with the median estimate of economists for a 0.4 percent increase. So-called retail control-group sales, which are used to calculate gross domestic product and exclude food services, auto dealers, building-materials stores and gasoline stations, gained 0.4 percent, matching estimates.
The improvement in demand went beyond a bump in auto sales, as consumers went shopping at furniture and home stores along with electronics and appliance sellers. The results underscore that the declines from December to February were more of a pause following a post-hurricane spending binge. That supports the Federal Reserve’s view that such weakness was transitory, as well as the central bank’s outlook for two or three more interest-rate increases this year following a quarter-point hike in March.
“It’s nice to see the bounce-back here -- to me it’s just on trend,” Societe Generale senior U.S. economist Omair Sharif said. “If you look at the quarter as a whole, we’re not breaking out from the kind of real spending numbers we’ve seen the last several years.”
Eight of 13 major retail categories showed increases. Sales at health and personal-care stores rose 1.4 percent, the most in two years. Auto sales rose 2 percent, the most since September; a report last week showed purchases of cars and light trucks rose to a 17.4 million annualized rate in March, the fastest this year.
Weaker sales categories included building-materials stores, which fell 0.6 percent; apparel stores, down 0.8 percent; and sporting goods, hobby, book and music stores, off 1.8 percent, the most since December, the data showed.
Consumer optimism has held at relatively high levels thanks to factors including job-market strength, rising wages and lower taxes. Refunds from 2017 returns may have also given retail sales a boost in March.
Even with the bounceback, consumer spending probably expanded at a slower pace in the first quarter. Control-group sales rose at a 1 percent annualized rate over the last three months, compared with 7.6 percent in the three months through December.
What Our Economists SayThere are multiple possible explanations for the consumer soft patch in the first quarter: delayed tax refunds, high utility bills sapping financial resources, a rise in interest rates, payback for over-exuberant spending in the fourth quarter in anticipation of tax cuts and similarly payback for a surge in spending in the aftermath of hurricane season. Regardless, a healthy profile for wage and salary gains signals that households have the wherewithal to provide a firmer lift to growth in the current quarter.
-- Carl Riccadonna and Niraj Shah, Bloomberg Economics
Read more for the full reaction note on U.S. retail sales.
The relatively weak spending has kept estimates for economic growth in check, with analysts forecasting before Monday’s report that gross domestic product expanded at a 2.2 percent annualized pace in the January-March period, down from 2.9 percent in the previous quarter.
“We’ll see how well tax breaks work going forward -- the onus is now on the consumer,” Sharif said. “People were so built up on the economy and tax cuts, but our view is that it’s more steady than acceleration.”
The data on Monday also showed that a decline in gasoline costs, as reported last week in the Labor Department’s consumer-price index, may have weighed on filling-station receipts. Gas-station sales dropped 0.3 percent, the most since July, according to the Commerce report. Excluding automobiles and gasoline, sales advanced 0.3 percent for a second month.
— With assistance by Jordan Yadoo, and Sophie Caronello