Automobiles drive U.S. retail sales higher in March

The Commerce Department yesterday said that retail sales increased 0.6 percent last month after an unrevised 0.1 percent dip in February. January data was revised to show sales falling 0.2 percent instead of the previously reported 0.1 percent drop.
Economists polled by Reuters had forecast retail sales rising 0.4 percent in March. Retail sales in March increased 4.5 percent from a year ago.
“Consumers are doing their part to drive the economy forward as they restart their engines from a cold and snowy winter,” said Chris Rupkey, chief economist at MUFG in New York.
Excluding automobiles, gasoline, building materials and food services, retail sales rose 0.4 percent last month after being unchanged in February. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
They were previously reported to have risen 0.1 percent in February. Last month’s pick-up in core retail sales did little to change expectations of a sharp slowdown in consumer spending in the first quarter.
The dollar was trading weaker against a basket of currencies. Prices for U.S. Treasuries were marginally lower while stocks on Wall Street rose.
Economists largely blame the weakness in retail sales at the start of the year on delays in processing tax refunds. Some also argue that income tax cuts, which came into effect in January, only reflected on most workers’ paychecks in late February.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a robust 4.0 percent annualized rate in the fourth quarter. It is expected to have slowed to below a 1.5 percent rate of increase in the first quarter.
Growth estimates for the January-March quarter are running below a 2 percent rate. The economy expanded at a 2.9 percent pace in the October-December quarter. Growth tends to slow in the first quarter because of a seasonal quirk.
The government will publish its advance estimate for first-quarter GDP growth later this month.
A robust labor market, which is expected to generate stronger wage growth, is expected to underpin consumer spending. Low household savings, however, remain a constraint.
In March, auto sales jumped 2.0 percent, the largest increase since last September, after declining 1.3 percent in February. Receipts at service stations fell 0.3 percent, reflecting cheaper gasoline.
Sales at furniture stores climbed 0.7 percent while those at electronics and appliance stores increased 0.5 percent. But sales at building material stores fell 0.6 percent last month.
Receipts at clothing stores dropped 0.8 percent while sales at online retailers increased 0.8 percent. Sales at restaurants and bars gained 0.4 percent. Receipts at sporting goods and hobby stores dropped 1.8 percent.
In a second report on Monday, the Commerce Department said that business inventories rose 0.6 percent in February after a similar increase in January. February’s increase in inventories, which are a key component of gross domestic product, was in line with economists’ expectations.
Retail inventories excluding autos, which go into the calculation of GDP, rose 0.2 percent after edging up 0.1 percent in January. Economists expect inventory investment will contribute to growth in the first quarter after subtracting 0.53 percentage point from GDP growth in the October-December period. (Reuters)