Retail sales rebounded in March, rising by the largest amount in over a year. Growth was brod-based during the month, with most areas in the sector seeing rising sales.
The Census Bureau reported that total retail sales rose 1.6 percent in March on a seasonally adjusted basis from February’s levels. This far exceeded consensus estimates of a 1.1 percent gain, and marks the largest monthly increase in retail activity since September 2017. Year-over-year growth in the retail sector rose to 3.6 percent during the month, up from 2.2 percent growth in February..
Approximately one-third of the growth in March was driven by large increases in sales of motor vehicles and gasoline, which rose 3.1 percent and 3.5 percent, respectively. Core retail sales, which excludes these two categories, rose by a healthy 0.9 percent during the month and are now up 3.6 percent from this point last year.
Growth during the month was generally broad-based, with 12 of the 13 major industries within retail registering gains from February’s levels. Only sporting goods stores, which have been the poorest performers in the retail sector over the past year, saw declining sales during the month, falling 0.3 percent in March.
The March report gives a positive conclusion to what was otherwise a soft first quarter for the retail sector, where sales rose at a paltry 0.2 percent annualized pace. Growth during the quarter was hamstrung by poor weather, the government shutdown and smaller tax refunds in the early part of tax season. With these temporary factors largely in the rear view, and fundamentals from the labor market pointing in the right direction, retail performance should be solid in upcoming months.
Behind the numbers
The March retail results, combined with better trade data from February and continued strength in jobless claims, go a long way towards quashing fears of a recession. It now looks like the economy will grow above 2 percent during the first quarter, and should be able to sustain that pace of growth in the second quarter as well.
It is worth remembering that part of the strength in March is a bounceback from weather-related losses in February. It also helps that the size of tax refunds largely caught up with last year’s pace in March, after being down nearly 17 percent in early February. These factors, along with the recent surge in equity values in the economy, contributed to the strength in March and made for some gaudy headline numbers.
Going forward, the retail sector should continue to grow at a solid pace in the second quarter, perhaps gaining some additional momentum in upcoming months. With job growth rebounding in March and wage growth remaining strong, the fundamentals are still in place to support consumer spending in the economy. Growth is unlikely to recapture the pace seen in the middle of 2018, and consumers won’t get the same boost in 2019 from the tax cuts that were implemented in 2018, but retail should contribute more to growth than it did during the first quarter.
Ibrahiim Bayaan is FreightWaves’ Chief Economist. He writes regularly on all aspects of the economy and provides context with original research and analytics on freight market trends. Never miss his commentary by subscribing.