March Retail Sales Exceed Expectations, Reflecting Resilient Consumer Spending
Retail sales for March surpassed expectations, demonstrating robust consumer activity despite rising inflation. The Commerce Department reported a 0.7% increase in retail sales, outpacing the projected 0.3% rise. This growth occurred in the face of a 0.4% increase in the consumer price index, indicating that consumers were able to keep pace with inflation, which ran at a 3.5% annual rate for the month.
Excluding auto-related receipts, retail sales surged by 1.1%, well above the anticipated 0.5% advance. The core control group, a key component in GDP calculation, also saw a notable increase of 1.1%.
The rise in gas prices contributed to the overall increase in retail sales, with sales at service stations rising by 2.1% for the month. Notably, online sales experienced a significant uptick of 2.7%, while miscellaneous retailers saw a 2.1% increase.
However, certain categories experienced declines in sales, including sporting goods, hobbies, musical instruments, and books, which posted a 1.8% decrease. Additionally, clothing stores saw a 1.6% drop, and electronics and appliances reported a 1.2% decrease.
The positive retail sales data bolstered stock market futures and led to a surge in Treasury yields. Despite escalating tensions in the Middle East, the upbeat outlook for the Wall Street open remained strong.
Resilient consumer spending has been a crucial factor in sustaining economic growth, with consumer spending accounting for nearly 70% of U.S. economic output. The data reflects the importance of consumer activity in driving gross domestic product growth.
Market concerns over the trajectory of monetary policy have been heightened, with Federal Reserve officials showing caution about cutting interest rates amidst inflation pressures. The stronger-than-expected consumer spending may delay potential rate cuts, with market pricing pointing to the first cut possibly occurring in September.
In addition to the retail sales report, the Empire State Manufacturing index showed improvement in April, albeit remaining in contraction territory. Shipments and delivery time readings saw a decline, while prices paid increased.
