US Retail Sales Exceed Predictions, Elevating Projections for First-Quarter Growth
The US economy is off to a strong start in 2019, with retail sales surpassing expectations and boosting projections for first-quarter growth. In March, retail sales increased more than anticipated, driven by a surge in online purchases. This news, coupled with robust employment gains and a pick-up in consumer inflation, has led economists to believe that the Federal Reserve may delay cutting interest rates until September.
The Commerce Department’s report revealed a 0.7 percent rise in retail sales last month. Additionally, data for February was revised higher to show sales rebounding 0.9 percent, rather than the previously reported 0.6 percent. Economists had predicted a 0.3 percent increase in March retail sales. This year-on-year growth of 4.0 percent in March further solidifies the strength of the US retail sector.
Lower-income households, often predicted to face distress due to higher inflation and borrowing costs, have surprised experts by maintaining their spending levels. The latest Bank of America credit card data indicates that lower-income spending continues to outpace higher-income spending. Economists attribute this to the robust labor market, which has seen significant wage gains for lower-income workers since the start of the pandemic.
Job gains in the first quarter averaged 276,000 per month, compared to 212,000 in the previous quarter. With wage growth remaining above 4.0 percent on a year-on-year basis, consumers have more disposable income to spend.
While overall retail sales have been resilient, there are areas of weakness in certain sectors. Motor vehicles and parts dealers experienced a 0.7 percent decline in receipts, while furniture store sales slipped by 0.3 percent due to higher mortgage rates affecting home purchases. Sporting goods, hobby, musical instrument, and bookstore sales also dropped by 1.8 percent.
On the other hand, online retailers saw a significant boost in sales, with a 2.7 percent acceleration in March following a 0.2 percent gain in February. Gasoline stations also experienced a 2.1 percent increase in sales, reflecting higher prices at the pump. Building material and garden equipment store sales advanced by 0.7 percent, while sales at food services and drinking places rose by 0.4 percent.
Economists view dining out as a key indicator of household finances, and this increase in sales suggests that consumers are feeling confident about their economic situations. However, the decline in sales at electronics and appliance outlets, as well as clothing retailers, indicates that households may be cutting back on discretionary spending and focusing on essentials.
Core retail sales, which exclude automobiles, gasoline, building materials, and food services, increased by 1.1 percent in March. This figure, coupled with the upward revision of February’s data to show a 0.3 percent increase, suggests only a slight slowdown in consumer spending growth from the robust pace seen in the fourth quarter of 2018.
Overall, the strength of retail sales in the US points to a solid expansion in the economy. With consumer spending relying more on income from paychecks rather than government stimulus programs, experts believe that this growth trend will continue. The Federal Reserve may postpone interest rate cuts until September, given the positive economic indicators and the resilience of consumer spending.
In conclusion, the US retail sector has exceeded expectations in March, with retail sales increasing more than predicted. This has raised projections for first-quarter growth and led economists to believe that the Federal Reserve may delay interest rate cuts. While certain sectors experienced weakness, overall consumer spending remains robust and is supported by wage gains and a strong labor market. This bodes well for the future of the US economy as it continues to expand.
