March retail sales post gains, according to Commerce and NRF data

Data released today by the United States Department of Commerce and the National Retail Federation (NRF) indicated that slow economic momentum is ongoing, with both reporting that March retail sales showed growth.

The Department of Commerce reported that March retail sales at $411.1 billion were up 0.8 percent over February and 6.5 percent higher than March 2011. While March was higher in terms of actual sales value, February was up 1.1 percent over January and represents the highest monthly increase in retail sales in the last six months, as dictated by Commerce data.

Total sales for the January through March period were up 6.4 percent annually. And when excluding autos, Commerce said March retail sales rose 0.8 percent.

The NRF reported that March retail sales, which exclude autos, gas stations, and restaurants, were up 0.8 percent on a seasonally-adjusted basis from February and up 6.6 percent on an unadjusted basis annually.

“Moderate retail sales growth in March will help to offset murkier recent economic employment data,” NRF Chief Economist Jack Kleinhenz said in a statement. “We expect to see gains through the all-important summer months, but job and weak income growth coupled with stubbornly high gas costs will continue to force consumers to make tough, price-sensitive choices.”

As LM has reported, even though retail sales continue to show slow and incremental growth, continued growth is needed over a longer period, as consumer spending accounts for roughly 70 percent of U.S. economic activity. And while retail growth is relatively slow still, signals remain intact that the economy is showing signs of recovery, with consumer confidence on the upswing to a large degree and recent monthly gains in employment, too.
In an Associated Press report, Joshua Shapiro, an economist at MFR Inc., said retail sales “picked up considerably” in the first quarter, after a weak December gain. The report added that sales have been bolstered by greater hiring, and warm weather, which has added to clothing and home supply sales. Shapiro noted that the warmer weather may have moved up some retail spending by consumers, which could lead to weaker retail sales in April and May.

IHS Global Insight Senior Principal Analyst Chris G. Christopher, Jr. wrote in a research note that the unseasonably warmer winter has assisted in getting Americans out to automobile dealerships, building materials stores, clothing outlets, and sporting good stores, adding that Clothing and building material stores “have come on like gangbusters” since the beginning of winter.
“This is a good report,” wrote Christopher. “Consumers are spending despite feeling the pump price pinch. Looking ahead, we do not expect clothing and building material stores to benefit from the unseasonably warmer weather effect, and electronic stores will not continue to benefit from the Apple iPad bump.”

And while retail sales are showing slow, incremental signs of improvement, freight volumes are also showing steady growth for the most part, especially when compared to what happened during the depths of the Great Recession.

This has been seen in recent data from the American Trucking Associations, the Intermodal Association of North America, and the Cass Freight Index, among other metrics.

“The freight environment has been relatively healthy, even though the growth rate has slowed from what we had seen early last year,” said Eric Starks, president of FTR Associates. “That was to be expected but by and large things are still moving pretty well. These numbers are really pretty encouraging as things have been pretty strong on the consumer side over the last three months.”

What’s more, the trend of slight or flat sequential retail sales increases remains largely intact due to fairly even retail spending at a time when retailers remain cautious on the inventory planning side and postponing commitments until the until the economic outlook becomes clearer, while they are risking stock outages by having very lean inventories.

“What is driving these gains is a confidence issue and a lack of fear due to the lack of negative change in the most recent employment data,” said Ben Hackett, president of Hackett Associates, in a recent interview. “The overall feeling from that is that it creates confidence, with consumers willing to draw down some of their savings and use it for expenditures. We are also seeing that in e-commerce sales, which can be harder to measure. In big retail stores, you are seeing an increase in sales, which can also be partially due to price increases, too. But you never know if it is pure volume or price or a mixture of the two. The strong [trade] flows suggest that there was an increase in volume as well as sales.”