Retail spending surged in March for Americans despite the ongoing challenges of high interest rates and increased prices for everyday goods.
According to the Commerce Department’s report on Monday, retail sales, encompassing various consumer purchases such as cars, food, and gasoline, rose by 0.7% last month. This figure notably surpassed the modest 0.3% growth anticipated by economists at LSEG.
When excluding the volatile categories of gasoline and automobiles, sales saw an even more substantial increase of 1%.
It’s important to note that the March figures aren’t adjusted for inflation, implying that while consumers are spending more, their purchasing power may not be keeping up.
Jamie Cox, managing partner for Harris Financial Group, remarked, “The consumer is consuming, a lot. If you were looking for an economic slowdown, you aren’t getting it.”
Notably, consumers continued their spending spree at gas stations, grocery stores, and various retail outlets such as building material and garden stores, bars and restaurants, and health and personal care stores.
Online shopping also saw a significant boost, with spending at non-store retailers jumping 2.7% from the previous month.
However, there was a decline in spending at electronics and appliance stores, miscellaneous retailers, clothing stores, furniture stores, sporting goods, hobby, musical instrument, and bookstores.
The report indicates sales growth in eight out of 13 retail categories for the month.
Despite concerns about high inflation, a robust job market, and substantial wage increases have sustained consumer spending in recent months.
However, economists caution that consumers may become more cautious as student loan payments resume and high interest rates persist. Additionally, more Americans are turning to credit cards to cover essential expenses, leading to record levels of credit card debt and an uptick in delinquencies.
Nonetheless, the stronger-than-expected retail sales data suggests that consumers remain resilient for now, despite facing several economic challenges.
Lydia Boussour, EY senior economist, commented, “U.S. retail sales were stronger than expected in March, confirming that persistently high prices are not deterring consumers from spending as they continue to benefit from positive job growth and rising real wages.”
