April 15, 2024
Retail sales rose 0.7% in March after climbing 0.9% in February and declining 0.9% in January. It is true that the sales gains in February and March were robust and some economists are now suggesting that the next move by the Fed could be to raise interest rates. Nonsense. The strength in sales in those two months will take off the table a Fed easing move in June which has already been largely dismissed. But it is important to remember that sales were surprisingly weak in October, November, December, and January. Give the additional input from those months suggests to us that there is a problem trying to seasonally adjust sales data in the midst of the Christmas holiday season — both the weakness late last year and the apparent rebound in February and March. We suspect that the consumer is continuing to spend at a moderate pace. In the past year retail sales have risen by 4.1%.
Motor vehicle sales fell 0.7% in March after jumping 2.5% in February and falling 2.1% in January. In the past year car sales have risen 3.4%.
Retail sales ex autos and gas, which eliminates the two most volatile components and is a better gauge of the trend pace of sales, rose 1.0% in March after climbing 0.5% in February but falling 0.5% in January. In the past year this so-called core spending pace has risen 4.8%.
Restaurant sales rose 0.4% in March, 0.4% in February after falling 0.9% in January In the past year restaurant sales have risen 7.3%. Consumers still seem perfectly willing to go out to a restaurant.
Sales at nonstore retailers surged 2.7% in March after rising 0.2% in both January and February. Sales at on-line retailers like Amazon accounted for the impressive gain in March. Not quite sure why. In the past year nonstore sales have risen 11.0%.
The problem is that inflation has been rising more quickly than sales and, as a result, real retail sales have been declining in real terms. Our income has been rising and we kept spending, but the amount of goods and services we were able to purchase with our fatter paycheck was somewhat less than it was a year ago. However, in March real retail sales rose 0.3% after climbing 0.5% in February, but declining 1.2% in January
GDP seems on track to increase 2.5% in the first quarter as firms keep creating a respectable number of jobs each month, and the unemployment rate remains below the 4.0% full employment threshold. With no fear of losing their job, consumers are likely to keep spending albeit at a relatively slow pace. However, they are running up their credit card bills in the process in an effort to maintain their style of living. Unfortunately, that credit cards are a very expensive way to add debt. By doing so, it is clear that the consumer is beginning to struggle.
Stephen Slifer
NumberNomics
Charleston, SC
Hi Steve,
How much of the $2T is going to large corporations vs small business?
Hi Brian,
There are tons of different pieces to that program. But it appears to me that the only “big business” that is getting money is the airline industry. Here are some of the highlights:
1. Every taxpayer receives $1,200 check. $500 extra per kid.
2. Unemployed workers get extgra $600/ week for up to 4 months. When couple with state benefits, some will be making more on unemployment than on their day job.
3. Hospitals get $100. Losing money because they are forced to postpone elective surgeries which is wher they make their money. I think they also get a bigger reimbursement from Social Security for treating COVID19 patients.
4. Airlines get $29 billion in grants, $29 billion in loans.
5. Small businesses get tax credit if they keep workers on the payroll.
6. State and local governments get $150 billion. They are losing sales tax and corporate profits + they have expenses involved with the corona virus like police, fire, EMT.
7. Defense Dept. gets $10.5 billion for deploying National Guard to distribute medical supplies, food, etc.
8 Employers get to defer the 6.25% payroll tax which is their portion of funding Social Security.
9. Payments in there for telemedicine, food stamps, farmers.
A little something for everybody.
Steve
Hello Steve,
I pray for a weak covid episode and a quick recovery!
I had some time to kill yesterday before a dentist appointment so I went by an outdoor store in North Charleston and Tanger mall. In both cases, I could’ve rolled the bowling ball down the aisles and never hit a person. This was around 11 o’clock in the morning yesterday not a very good gauge on retail activity, but still these are gathering points for customers. My guess is a lot of the Retail sales growth is online sales.
Hi Neil,
Mary and I went to the Tanger outlet in Bluffton a few weeks ago. It seemed fairly busy, but not like what it used to be a decade or so ago. And you are right that the bulk of recent sales are on-line. For example in March total retail sales rose $5.l billion of which $3.3 billion came from on-line sales. Thus two-thirds of the growth in sales came from on-line retailers which account for just 17.3% of total sales. For what it is worth, just prior to the recession (December 2019) on-line sales were 12.3% of the total. They have increased market share by about 1.0% per year in each of the past four years. Impressive.