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US Retail Sales Rose 0.5% in March, But What Does That Really Mean?

Apparel and specialty stores posted gains in March, but overall U.S. retail sales weren’t quite as robust when stripping out the price at the pump.

In general, U.S. retail sales rose 0.5 percent to $665.73 billion, but that was due to a boost from gasoline sales that rose 8.9 percent. Sales overall increased 6.9 percent compared with March 2021, however, excluding spending at the pump, U.S. retail sales fell 0.3 percent in March, impacted by a decline in sales of automobiles and online purchases, according to data from the U.S. Census Bureau.

Sales at apparel and specialty stores rose 3 percent to $26.94 billion from $26.25 billion in February. Department store sales were essentially flat at $12.14 billion, versus $12.18 billion in February. Online retailers saw a decline in purchases, down 6 percent to $90.35 billion from $96.54 billion. Home furnishing stores rose 1 percent in March to $12.86 billion from $12.78 billion.

Economists at Wells Fargo saw the March retail sales report as reflecting mixed results for retail. Since the government report does not adjust for inflation, Wells Fargo economists Tim Quinlan and Shannon Seery concluded that real retail sales fell 1.6 percent in the period. Still, the report did show consumer resiliency in spending, and that means that even if inflation is not going away, it could represent less of a headwind.

“March retail sales show that consumers have maintained their ability to spend in the face of record-level inflation, supply chain issues and geopolitical unrest,” National Retail Federation (NRF) president and CEO Matthew Shay said. “Consumers are adapting and shopping smarter for themselves and their families. We believe the strength of the consumer can carry the economy through this considerable economic uncertainty if policymakers implement measured policies and do not overreact to current conditions.”

NRF chief economist Jack Kleinhenz said that even though prices rose in March and eroded spending power, “shoppers remained resilient and sales were healthy.” He said consumer willingness to spend has been “supported by rapid hiring, increased wages, larger-than-usual tax refunds and the use of credit.”

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The NRF believes U.S. consumer spending could drive 6 percent to 8 percent retail sales growth for 2022, or $4.86 trillion to $4.95 trillion, although the retail trade group does recognize inflation as a headwind.

Naveen Jaggi, president of Retail Advisory Services, JLL, said sales rose as consumer excitement grew for warmer weather, spring break travel plans and the return to the office for some.

“Looking ahead, we expect retail sales to grow between 5 and 7 percent this year, as Americans shift spending to restaurants, return to work clothes, trips, back-to-school clothing, and holidays,” Jaggi said. “According to JLL Research, shopping center foot traffic rose 14.7 percent from February to March 2022, and we can expect urban mall traffic to slowly follow and return to pre-pandemic levels.”

Jaggi said that if gas prices remain high next month, there’s the possibility that consumers could cut back spending on food and apparel.

How long that lasts remains to be seen.

U.S. nonfarm payrolls in March grew by 431,000. That figure missed economists’ consensus estimate of 490,000, and represented a slowdown from February’s 750,000-job expansion for a 3.6 percent unemployment rate.

On Thursday, initial jobless claims rose 185,000 for the week ended April 9. That figure represents an increase of 18,000 from the week before, and was above the 172,000 consensus estimate of economists. The unemployment rate is still within the range of 3.6 percent, representing a relatively tight labor market.