Higher gasoline prices flatter US retail sales; consumers remain resilient

Shoppers look for deals at the Pentagon City Mall in Arlington, Virginia, U.S., November 29, 2019. REUTERS/Loren Elliott/File Photo

WASHINGTON, April 14 (Reuters) – U.S. retail sales rose sharply in March, boosted by record gasoline prices, but consumers are starting to feel the pinch from high inflation, online spending recording consecutive declines for the first time. in over a year.

Thursday’s Commerce Department report, which also showed stronger retail sales growth in February than initially thought, suggests consumer spending picked up in the first quarter, helping to support the overall economy. .

The tight labor market, which is pushing up wages, and the massive savings accumulated during the pandemic offer some protection against inflation. Annual inflation rose the most in more than 40 years in March, although there are signs that price pressures have peaked and should start to ease gradually.

“The report continues to show resilience in consumer spending,” said Tim Quinlan, senior economist at Wells Fargo in Charlotte, North Carolina. “There is no doubt that households are feeling the pinch of soaring prices across a range of products. But there are signs that pandemic-related inflation is starting to ease.”

Retail sales rose 0.5% last month. Data for February has been revised up to show sales rose 0.8% instead of 0.3% as previously reported. Economists polled by Reuters had forecast retail sales rising 0.6%, with estimates ranging from a decline of 0.3% to an increase of 2.2%.

Retail sales, mostly made up of goods, rose 6.9% year on year. They are not adjusted for inflation.

Gasoline station sales jumped 8.9%, accounting for the bulk of March’s sales increase. Monthly consumer prices rose the most in 16-and-a-half years in March as Russia’s war on Ukraine drove the cost of gasoline in the United States to record highs. Pump prices averaged a record high of $4.33 a gallon in March, according to AAA.

Excluding gasoline, retail sales fell 0.3%.

Although gasoline prices have since retreated to an average of $4.074 per gallon, strong inflation is expected to prevail. A separate Labor Department report released Thursday showed import prices jumped 2.6% last month, the biggest rise since April 2011, after rising 1.6% in February. Read more

Wall Street stocks were down. The dollar appreciated against a basket of currencies. US Treasury prices fell.

A STRONG LABOR MARKET

Soaring prices are reducing consumers’ purchasing power, but rising wages are helping to cushion some of the blow. The unemployment rate is at its lowest level in two years of 3.6% and there were a near record number of 11.3 million job openings at the end of February, which allows some Cash-strapped Americans find it easier to take on a second job or take on extra shifts.

Consumers have also accumulated over $2 trillion in excess savings during the COVID-19 pandemic.

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits rose by 18,000 to a still-low seasonally adjusted 185,000 for the week ended April 9. Economists had forecast 171,000 claims for the past week.

Lower gas prices and a firming job market pushed consumer confidence up after hitting a ten-year low in early April. Read more

Better job security also allows some consumers to take on more debt. Last month, sales at clothing stores rose 2.6%. Receipts at building material, garden equipment and supply stores as well as furniture, food, electronics and appliance retailers also increased.

Sales at sporting goods, hobby, musical instrument and book stores rose 3.3%. Revenue from bars and restaurants, the only service category in the retail sales report, rose 1.0%. Demand for services such as air travel and hotel accommodation is increasing, further supporting consumer spending. This follows the rollback of pandemic restrictions.

But sales at car dealerships fell 1.9% amid a continued shortage of motor vehicles. Online store sales fell 6.4% after falling 3.5% in February, the first consecutive decline since the last two months of 2020, which some economists have attributed to stretched household budgets due to the shock gasoline prices. Others blamed changing seasonal patterns.

Online retail sales fell from a high of $100.0 billion in January to $90.350 billion in March. There are fears that rising interest rates, as the Federal Reserve tries to stamp out inflation, will dampen demand in the coming months.

“If previous environments are any indication, the second half of 2022 could see a slowdown in consumer demand as the Fed tries to contain high price levels,” said Peter Essele, head of portfolio management at Commonwealth. FinancialNetwork.

Excluding automobiles, gasoline, building materials and food services, retail sales fell 0.1% in March. Data for February has been revised up to show these so-called core retail sales fell 0.9% instead of 1.2% as previously reported.

Core retail sales correspond most closely to the consumer spending component of gross domestic product. February’s upward revision and March’s modest decline prompted some economists to raise their estimates for first-quarter consumer spending and GDP growth. Goldman Sachs raised its GDP growth estimate to 1.5% from 1.0%. The economy grew at a robust 6.9% in the fourth quarter.

“Today’s report continues to reflect strong consumer demand in the first quarter, but we see headwinds from the oil price shock combined with tighter monetary policy reducing real consumer spending growth later this year. year and next,” said Ellen Zentner, chief U.S. economist at Morgan Stanley. At New York.

Reporting by Lucia Mutikani, editing by Chizu Nomiyama and Andrea Ricci

Our standards: The Thomson Reuters Trust Principles.