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


Charleston, SC