The Commerce Department reported on Wednesday that consumer spending exceeded expectations in March, with demand holding strong despite a noticeable decline in sentiment.
The preliminary retail sales figures showed a notable monthly increase of 1.4%, surpassing the Dow Jones estimate of 1.2% and greatly exceeding February’s modest rise of 0.2%. On an annual basis, sales witnessed a 4.6% increase, a figure adjusted for seasonal factors but not for inflation.
When excluding automotive sales, the data remained robust, with a 0.5% increase against a predicted rise of 0.3%. Economists had forecasted a boost in auto sales as consumers looked to act before the implementation of President Trump’s import tariffs.
Sales at motor vehicle and parts dealers soared by 5.3%, reflecting strong consumer activity in this sector.
This report indicates that consumer spending remains resilient despite the headwinds posed by anticipated tariffs and growing concerns regarding economic slowdown.
“These March retail sales numbers are simply outstanding, resembling a massive clearance event,” remarked Chris Rupkey, chief economist at FWDBONDS. “Consumers seem to be preparing for significant price increases in the coming year, rushing to clear store shelves and seize bargains while they can.”
Market reactions to the report were muted, with stock futures slightly lower and longer-dated Treasury yields trending upward.
The favorable retail sales figures stand in contrast to recent sentiment analyses that highlight pervasive fears about the potential economic impact of Trump’s tariffs potentially leading to a recession and rising prices. A recent University of Michigan sentiment survey recorded its second-lowest reading ever, alongside the highest inflation expectations in over four decades.
Apart from the substantial gains in auto-related sales, other notable categories included a 2.4% increase for sporting goods, hobby, and music stores, as well as a 3.3% uptick in building material and garden store sales. Food service and drinking establishments saw a 1.8% increase, while gasoline station sales dropped by 2.5% amidst falling prices during the month.
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