Retail sales jumped 0.7% in March, much higher than expected

Rising
inflation
in
March
didn’t
deter
consumers,
who
continued
shopping
at
a
more
rapid
pace
than
anticipated,
the
Commerce
Department
reported
Monday.

Retail
sales
increased
0.7%
for
the
month,
considerably
faster
than
the
Dow
Jones
consensus
forecast
for
a
0.3%
rise
though
below
the
upwardly
revised
0.9%
in
February,
according
to

Census
Bureau
data
that
is
adjusted
for
seasonality
but
not
for
inflation.

The

consumer
price
index
increased
0.4%
in
March,
the
Labor
Department
reported
last
week
in
data
that
also
was
higher
than
the
Wall
Street
outlook.
That
means
consumers
more
than
kept
up
with
the
pace
of
inflation,
which
ran
at
a
3.5%
annual
rate
for
the
month,
below
the
4%
retail
sales
increase.

Excluding
auto-related
receipts,
retail
sales
jumped
1.1%,
also
well
ahead
of
the
estimate
for
a
0.5%
advance.
The
core
control
group,
which
strips
out
several
volatile
measures
and
is
in
the
formula
to
determine
gross
domestic
product,
also
increased
1.1%

A
rise
in
gas
prices
helped
push
the
headline
retail
sales
number
higher,
with
sales
up
2.1%
on
the
month
at
service
stations.
However,
the
biggest
growth
area
for
the
month
was
online
sales,
up
2.7%,
while
miscellaneous
retailers
saw
an
increase
of
2.1%.

Multiple
categories
did
report
declines
in
sales
for
the
month:
Sporting
goods,
hobbies,
musical
instruments
and
books
posted
a
1.8%
decrease,
while
clothing
stores
were
off
1.6%,
and
electronics
and
appliances
saw
a
1.2%
drop.

Stock
market
futures

added
to
gains
following
the
report,
while
Treasury
yields
also
pushed
sharply
higher.
The
upbeat
outlook
for
the
Wall
Street
open
came
despite
an
escalation
over
the
weekend
in
Middle
East
tensions
as

Iran
launched
aerial
strikes
on
Israel.
Stocks
surrendered
gains
later
in
the
session
as
yields
surged.

“Strong
sales
growth
in
March
salvaged
an
otherwise
mediocre
quarter
for
retailers,”
said
Jim
Baird,
chief
investment
officer
at
Plante
Moran
Financial
Advisors. “Q1
growth
isn’t
going
to
generate
a
round
of
high
fives,
but
closing
out
the
quarter
on
a
strong
note
should
allow
them
to
breathe
a
sigh
of
relief
and
a
glimmer
of
hope
that
momentum
could
carry
through
into
the
coming
months.”

Resilient
consumer
spending
has
helped
keep
the
economy
afloat
despite
higher
interest
rates
and
concerns
over
stubborn
inflation.
Consumer
spending
accounts
for
nearly
70%
of
U.S.
economic
output
so
it
is
critical
to
continued
growth
in
gross
domestic
product.

Monday’s
data
comes
with
market
concerns
elevated
over
the
path
of
monetary
policy.
Federal
Reserve
officials
have
expressed
caution
about
cutting
interest
rates
while
inflation
pressures
continue,
and
investors
have
been
forced
to
reduce
their
expectation
for
easing
in
policy
this
year.

Stronger
consumer
spending
could
cause
the
Fed
to
hold
off
longer
on
cuts,
said
Andrew
Hunter,
deputy
chief
U.S.
economist
at
Capital
Economics.

“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,”
Hunter
said
in
a
note
after
the
retail
sales
release.

Market
pricing,
which
has
been
highly
volatile
over
the
past
several
weeks,
also
is
pointing
to
the
first
cut
coming
in
September,
according
to
the
CME
Group’s
FedWatch
gauge
of
futures
prices.

In
other
economic
news
Monday,
the
Empire
State
Manufacturing
index,
which
gauges
activity
in
the
New
York
region,
increased
in
April
from
a
month
ago
but
remained
in
contraction
territory.
The
index
hit
-14.3,
better
than
the
-20.9
reading
for
March
but
below
the
Dow
Jones
estimate
for
-10.

The
index
measures
the
percentage
of
firms
reporting
expansion
against
contraction,
so
anything
below
zero
represents
contraction.
Shipments
and
delivery
time
readings
saw
a
decline,
while
prices
paid
increased.