WSJ: U.S. Retail Sales Rise for First Time in Four Months


U.S. consumers boosted their spending in March but showed signs of continued caution despite months of cheaper gasoline and rising confidence.

Sales at retailers and restaurants increased 0.9% last month to a seasonally adjusted $441.4 billion, the Commerce Department said Tuesday. That was the biggest monthly gain in a year, but it was still down from November, when retail sales reached their highest level since the end of the recession.

Economists surveyed by The Wall Street Journal had expected total sales would jump 1.1% in March to offset three months of declines. The disappointing performance underscored the economy’s difficulty in accelerating almost six years into the expansion.

“This outcome confounds all the standard consumer-spending models,” said J.P. Morgan Chase chief U.S. economist Michael Feroli. “Job gains, wealth gains, low gas prices and very high consumer sentiment would all point to solid consumer spending increases.”

Retail-sales data can be volatile from month to month. Spending surged last fall before slowing during harsh winter weather in much of the country. The dip was reminiscent of a slowdown during the first quarter of 2014, when below-normal temperatures and severe weather kept shoppers away from stores.

A March thaw was expected to drive a bigger rebound in consumer spending last month. “Instead, consumers’ high level of confidence seems only to be matched by their conservatism,” Mr. Feroli said.
Compared with a year earlier, overall retail sales were up 1.3% in March. In March 2014, the year-over-year increase was 4.5%.

The latest report follows a string of weak economic data that has led many economists to dial back estimates for first-quarter economic growth.

J.P. Morgan economists put their estimate at 0.6% while Morgan Stanley sees first-quarter growth at 0.9%. The Federal Reserve Bank of Atlanta on Tuesday put its first-quarter growth estimate at an annualized 0.2%.


“There’s a lot of signs that would point to a healthier economy,” Nordstrom Inc. Chief Financial Officer Michael Koppel told investors last month. Those include steady hiring, lower gasoline prices and a strong stock market. But “it’s not like we’ve seen that breakout performance” for discretionary spending.

Despite the overall sales increase in March, economists said the details within Tuesday’s report were disappointing.

The higher sales were largely driven by car purchases, which rose 2.7% last month. But weak sales at gas stations continued to hold back overall growth, despite an uptick in oil prices in March. When excluding both gasoline and autos, sales rose 0.5% last month.

A surge in spending at home-improvement stores, including building supplies and garden-equipment retailers, also helped boost sales in March.

“The East Coast really had a hard winter, and we supply a lot of the goods that help people with that, and that helped us,” Ace Hardware Chief Executive John Venhuizen said in an interview. “We’re fortunate that a lot of our business at Ace…is not as much driven by desires and discretionary spending as it is by needs.”

Americans also spent more on furniture, clothing and accessories in March. They trimmed spending on electronics and appliances, online shopping, and groceries and beer.

The retail-sales data are adjusted for seasonal variations but not for price changes. The report doesn’t include estimates for most services, which make up the bulk of consumer spending.

Paying less at the pump should free up money for U.S. consumers to spend elsewhere. But many are socking that money away, or using it to pay down debt.

The personal saving rate climbed to 5.8% in February, its highest level since the end of 2012, the Commerce Department said last month.

Americans also pared down their credit-card balances in February, posting the largest percentage decline in nearly four years, according to the Federal Reserve.

Still, some economists and merchants expect sales will continue to rebound in coming months.

Lisa Kornstein, founder of the Scout & Molly’s boutique clothing stores, said sales slowed in February when winter weather hit. But warmer temperatures and lower gas prices recently have led to a steady stream of shoppers at the Raleigh, N.C., location she operates.

“The door is propped open and we’ve had a consistent stream of traffic all day,” she said last week. “The economy is doing better…and I think people had a little bit of cabin fever.”

Sales at her stores are up between 7% and 10% from a year earlier, she said.

In a speech last month, Fed Chairwoman Janet Yellen said she expected a rebound despite disappointing retail sales data in the early months of 2015.

“I think consumer spending is likely to expand at a good clip this year given such robust fundamentals as strong employment gains, boosts to real incomes from lower energy prices, continued increases in household wealth and a relatively high level of consumer confidence.”The Fed is watching the data as it weighs whether the economy is strong enough to withstand an increase in interest rates.

“For a Fed that is supposedly focused on the data, we suspect the retail sales report is another factor tilting the deck toward a September liftoff rather than June,” said John Ryding and Conrad DeQuadros, economists at RDQ Economics.
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