U.S. Retail Sales Top Forecasts

U.S. retail sales rose by more than forecast in March, and the prior month was revised higher, showcasing resilient consumer demand that keeps fueling a surprisingly strong economy.

The value of retail purchases, unadjusted for inflation, increased 0.7 percent from February, Commerce Department data showed Monday. That matched the highest estimate in a Bloomberg survey of economists. Excluding cars and gasoline, sales jumped 1 percent month over month.

So-called “control-group sales”—which are used to calculate gross domestic product (GDP)—jumped 1.1 percent, the most since the start of last year. The measure excludes food services, auto dealers, building materials stores, and gas stations. That likely bodes well for first-quarter GDP, especially after the February reading was revised higher.

The report suggests plenty of momentum in consumer spending heading into the second quarter. So long as a robust labor market supports household demand, there’s a risk that inflation will become entrenched in the economy and further delay interest rate cuts from the Federal Reserve.

“Alongside the recent resurgence in employment growth, the continued resilience of consumption is another reason to suspect the Fed will wait longer before starting to cut interest rates, which now we think won’t happen until September,” Andrew Hunter, deputy chief U.S. economist at Capital Economics, said in a note.

Stock futures held onto gains, while Treasury yields rose after the report. Traders continue to see the Fed’s first cut coming well into the second half of this year.

Eight out of 13 categories posted increases, led by e-commerce. Receipts at gas stations rose as prices jumped in the month, while auto sales declined.

The retail figures largely reflect purchases of goods, which comprise a relatively narrow share of overall consumer outlays. Data due later this month will provide more details on inflation-adjusted spending on goods and services in March.

What Bloomberg Economists Say…

“Consumers remain conscious of high interest rates, but growing income continues to support their daily consumption. March’s retail data means consumption heading into Q2 will be stronger than we initially expected—suggesting the gradual slowdown in consumption we expected this year may be further delayed.”

— Estelle Ou & Eliza Winger.

Monday’s figures show purchases made at restaurants and bars—the only service-sector category in the report—advanced 0.4 percent. Receipts at grocery stores climbed by the most since August.

Meanwhile, other data suggest consumers are becoming more stretched. U.S. credit card delinquency rates were the highest on record in the fourth quarter, according to a report from the Philadelphia Fed.

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