US retail sales rose 0.8% in March
HEALTHIER job market and warmer weather encouraged more Americans to shop in March. US retail sales rose 0.8 percent last month, the Commerce Department said on Monday. That’s below February’s 1 percent increase but above January’s pace.
Some of the increase went to pay higher gas prices. Still, steeper gas hasn’t deterred Americans from spending more on other goods. Consumers spent more on building materials, autos, electronics, furniture and clothing. Excluding car and gasoline sales, retail sales increased 0.7 percent. And excluding autos, gas, and home supplies, so-called ‘core’ sales rose 0.5 percent in March, matching February’s gain. A separate Commerce report showed that US companies restocked at a steady pace in February.
That suggests businesses expect consumers to continue this spring. Investors initially seemed pleased by the retail sales gains. The Dow Jones industrial average rose more than 110 points in the first half hour of trading. But the Dow gave up half of those gains after a third report showed US builders are less hopeful about the housing market after six months of rising or steady confidence. Joshua Shapiro, an economist at MFR, said retail sales have ‘picked up considerably’ in the first quarter, after a weak December gain.
Sales have been bolstered by greater hiring, but also unseasonably warm weather, which has added to clothing and home supply sales. Shapiro and other economists cautioned that the warmer weather may have moved up some retail spending by consumers, which could lead to weaker retail sales in April and May. Still, the gain pushed retail sales to a record high of $411.1 billion, 24 percent higher than the recession low hit in March 2009. The retail sales report is the government’s first look each month at consumer spending, which represents 70 percent of economic activity. The increase, along with other recent positive data on inventories and trade, suggests growth in the January-March quarter could be stronger than first thought.
Economists are estimating growth at an annual rate of between 2.5 percent and 3 percent in the first quarter. That’s in line with the 3 percent annual pace in the October-December quarter. Americans are more confident in the economy after seeing hiring strengthen this winter. Job gains averaged 246,000 per month from December through February. Hiring slowed to half that pace in March, although economists have suggested the lull may be temporary. More hiring has helped lower the unemployment rate from 9.1 percent in August to 8.2 percent in March. Still, the stronger hiring hasn’t translated into higher salaries. Americans’ pay isn’t keeping pace with inflation. That, along with higher gas prices, could restrain consumer spending later this year.
Gas prices rose more slowly last month, according to a separate report released last week. And in the last two weeks, they are showing signs of leveling off. That may also be giving consumers more incentive to spend. Americans stepped up shopping last month. Retail merchants reported a 4.1 percent increase in sales in March compared to a year ago, according to a tally of 22 retailers by the International Council of Shopping Centres. Many retailers, from luxury chain Saks Inc. to department store operator Macy’s to discounter Target reported sales above analysts’ forecasts.