Consumer spending largely driven by spike in pump prices

WASHINGTON – Consumers continued to spend in March despite price hikes driven by a four-decade high in inflation, according to economic data released today.

March retail sales were up 0.5%, the Commerce Department reported. It was the third consecutive month in which retail sales increased in the face of rising prices, notably an 8.9% spike in gasoline prices.

The latest Consumer Price Index showed an 8.5% increase in March compared to a year earlier.

Import prices in March increased 2.6%, the biggest one-month rise in more than a decade.

“March retail sales show that consumers have maintained their ability to spend in the face of record-level inflation, supply chain issues and geopolitical unrest,” Matthew Shay, president and chief executive at the National Retail Federation, said in a statement. “Consumers are adapting and shopping smarter for themselves and their families. We believe the strength of the consumer can carry the economy through this considerable economic uncertainty if policymakers implement measured policies and do not overreact to current conditions.”

NRF’s calculation of retail sales excludes gasoline stations, restaurants and auto dealerships to focus on core retail. The federation’s latest data show retail sales on a seasonal basis were unchanged in March but up 4% compared to March 2021.

“Consumers have the willingness to spend and their ability to do so has been supported by rapid hiring, increased wages, larger-than-usual tax refunds and the use of credit,” according to Jack Kleinhenz, chief economist at NRF. “They are largely dealing with the shock of gas prices but will be facing higher interest rates as the Federal Reserve tightens monetary policy in the coming months. The challenge for the Fed is to cool off demand without pushing the economy into a dramatic slowdown.”

Initial jobless claims for the week ended April 9 increased by 185,000, an increase of about 18,000 from the week earlier and higher than economists had been expecting.

March sales were up in all but two categories on both a monthly and yearly basis, with year-over-year gains led by grocery, clothing and furniture stores, according to NRF. Specifics from key sectors include:

• Grocery and beverage stores were up 1% month over month seasonally adjusted and up 7.9% unadjusted year over year.
• Clothing and clothing accessory stores were up 2.6% month over month seasonally adjusted and up 7.5% unadjusted year over year.
• Furniture and home furnishings stores were up 0.7% on a monthly basis and up 4.2% year over year.
• General merchandise stores were up 5.4% month over month and up 3.9% unadjusted year over year.
• Online sales slumped 6.4% month over month but were up 2.6% unadjusted year over year.
• Building materials and garden supply stores were up 0.5% month over month adjusted and up 1.8% unadjusted year over year.
• Health and personal care stores were down 0.3% month over month but up 0.9% unadjusted year over year.
• Sporting goods stores were up 3.3% on a monthly basis but down 5.7% unadjusted year over year.
• Electronics and appliance stores were up 3.3% month over month on a seasonal basis but down 9.6% unadjusted from a year earlier.