U.S. retail sales rose for the first time since January, but consumers also had some wiggle room after paying down debt in the first quarter.
The Commerce Department said on Tuesday that retail sales, including food services, rose 0.4 percent from March to $686.1 billion, and was up 1.6 percent from a year ago. Economists were expecting an increase of between 0.7 to 0.8 percent, with most of that increase from auto sales.
Retail trade sales rose 0.4 percent from March, with sales at nonstore retailers—i.e., online sellers—up 1.2 percent in April. Apparel and accessories specialty doors lost some ground, slipping 0.3 percent, while sales at department stores declined 1.1 percent. Sales at furniture and home furnishings retailers decreased by 0.7 percent.
The data is seasonally adjusted for holiday and trading-day variances, but does not take into account price changes.
Well Fargo economists Tim Quinlan and Shannon Seery noted in a report on Tuesday that some categories suggest “consumers [are] running out of momentum.” They pointed to department stores and furniture and home furnishing retailers as examples where consumers have dialed back their spending in April.
When factoring in inflation, the economists estimated that “real retail sales slid 0.2 percent in April, marking the third consecutive decline and fifth in six months.” Retail spending is slowing gradually, they said, noting that a robust jobs market and steady real income gains are supporting consumption.
For now, the going is still good for retail, but perhaps not so much in the future. “We continue to expect consumer spending will moderate over the course of the year. Credit conditions are tightening, excess savings is dwindling and slack is materializing in the labor market. All of these capacity factors are moving in the wrong direction,” the economists said.
“Retail sales rebounded in April, reflecting consumer resilience in the face of elevated economic uncertainty,” National Retail Federation (NRF) president and CEO Matthew Shay said. “Moderating price levels, continued labor market strength and wage gains have increased consumers’ ability to spend.”
But even Shay said consumers remain cautious and concerned about the current economic environment.
That was largely evident earlier this year when inflation was higher and consumers began to shore up personal balance sheets. WalletHub’s latest Household Debt Report indicates that consumers paid down $140 billion in debt during the first quarter of 2023, although that was 40 percent less than the first quarter of 2022. Total household debt fell to $17.13 trillion in the first quarter. When adjusted for inflation, household debt is $1.15 trillion below its peak from 2008. In addition, household mortgage debt—a large component of many consumers’ monthly budget—fell by $82 billion in the first quarter, while debt from home equity lines of credit in the period was down by $2.7 billion.
David Silverman, senior director at Fitch Ratings, said that the sales slowdown is due somewhat to easing inflation, but also to a softening consumer and continued spending shifts toward services. “Fitch expects sales volumes across many retailers to be negative this year,” he said, adding that “good inventory and cost control could support operating earnings and cash flow for better managed companies.”
“Continued declines are a reality, but they can cloud the picture of underlying changes occurring as the consumer’s lifestyle shifts and continued price elevation forces consumers to prioritize their spending decisions and make trade-offs,” Marshal Cohen, chief retail industry advisor for Circana, formerly The NPD Group and IRI, said.
The University of Michigan’s preliminary results for its May Surveys of Consumers show a decline confidence to 57.7 from 63.5 in April. The final data report for this month is due out on May 26. The Conference Board’s Consumer Confidence Index is set to report its latest findings on May 30.