U.S Retail Sales Unexpectedly Falls

Sales at U.S. retailers unexpectedly fell in March, raising concern consumer spending is losing momentum.

The 0.3 percent drop in purchases followed little change the prior month, Commerce Department figures showed Wednesday in Washington. The median forecast of 81 economists surveyed by Bloomberg called for a 0.1 percent gain.

The decrease was led by the biggest drop in demand for autos in a year, and cutbacks at clothing stores, Internet merchants and restaurants. Sustained gains in consumer spending, the biggest part of the economy, are needed at a time exports are still depressed by cooling global markets and U.S. manufacturing is barely emerging from a slump.

“I don’t think the consumer will spend beyond his or her means,” Gregory Daco, head of U.S. macroeconomics at Oxford Economics Ltd. in New York, said before the report. “A sustained acceleration in wages is still the missing piece.”

Estimates in the Bloomberg survey for total retail sales ranged from declines of 0.8 percent to a gain of 0.4 percent. The February tally was previously reported as a 0.1 percent drop.

Gains Swamped

While nine of 13 major categories showed gains last month, those increases weren’t large enough to offset the drop in autos, clothing and restaurants.

Automobile dealers’ sales dropped 2.1 percent in March, the biggest decrease since February 2015. That was in line with industry data earlier this month that showed the torrid pace of car demand was leveling off. Purchases of cars and light trucks grew at a 16.5 million annualized rate in March, the slowest in more than a year, according to Ward’s Automotive Group.

Excluding autos, purchases rose 0.2 percent last month after being little changed in February, Wednesday’s report showed. The increase was paced by a 0.9 percent jump in receipts at service stations that probably reflected the recent pickup in gasoline prices.

The Commerce Department’s retail sales data aren’t adjusted for prices, so higher fuel costs boost filling-station receipts.

Gasoline Prices

Regular gasoline at the pump climbed last month to an average $1.94 a gallon, or up 21 cents from the February average of $1.73, according to AAA, the biggest U.S. auto group. Fuel costs, however, remain a tailwind for consumers as the February level was the lowest since 2009.

Retail sales excluding automobiles and service stations increased 0.1 percent, less than the projected gain of 0.3 percent in the Bloomberg survey.
That suggests Americans are boosting savings even as the job market continues to improve.

The figures used to calculate gross domestic product, which exclude categories such as food services, auto dealers, home-improvement stores and service stations, showed a 0.1 percent advance, matching the prior month’s increase in the so-called retail control group.

The retail report showed sales decreased 0.9 percent at clothing chains, the biggest retreat since October, and a 0.8 percent drop at restaurants and bars.

Less Spending

Some economists may further trim estimates for consumer spending following the retail sales results. The median forecast in a Bloomberg survey shows household purchases rose at a 1.9 percent annualized rate in the first quarter, the weakest in a year and following a 2.4 percent pace in the prior three months.

The labor market continues to remain robust, however. The March payrolls report showed employers added 215,000 workers to payrolls after a 245,000 February advance, while the jobless rate edged up to 5 percent as more people entered the labor force.

A separate report from the Labor Department Wednesday showed wholesale prices in the U.S. unexpectedly fell in March for a second month, showing inflation is still well-contained as Federal Reserve officials weigh whether further increases in the benchmark interest rate are warranted.

The 0.1 percent drop in the producer-price index followed a 0.2 percent decrease in February. Over the past 12 months, wholesale prices fell 0.1 percent.

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Bloomberg

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell