March retail sales remain up but fuel prices are a concern

With the price per gallon of diesel fuel now officially north of $4, there remains a distinct possibility that future retail sales could tail off or remain relatively flat in the coming months.

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Data published today by the United States Department of Commerce and the National Retail Federation (NRF) pointed to sustained momentum for March retail sales.

March retail sales, which include non-general merchandise like automobiles, gasoline, and restaurants, were $389.3 billion for a 0.4 percent increase from February and a 7.1 percent increase compared to March 2010, according to Commerce data. Commerce said that total retail sales from January through March were up 8.1 percent annually.

March also represents the ninth straight month of increased retail sales and is the highest month for retail sales since November 2007.

The NRF reported that February retail sales, which exclude automobiles, gas stations, and restaurants, were up 0.6 percent from February on a seasonally-adjusted basis and up 3.9 percent unadjusted year-over-year.

“Improving financial situations including the temporary payroll tax cut, wage gains and a strengthening labor market likely supported March spending gains,” said NRF Chief Economist Jack Kleinhenz in a statement. “If gasoline prices can stabilize over the next few months, consumer spending may continue to grow, but it remains to be seen what consumers will cut out of their budgets because of the cost of filling up their tank.”

With the price per gallon of diesel fuel now officially north of $4, there remains a distinct possibility that future retail sales could tail off or remain relatively flat in the coming months. Should prices continue to increase, it has the potential to negatively off-set the slow but steady growth which has been occurring in recent months.

Future increases in fuel has the potential to quell not only retail sales numbers but also freight volumes, which still remain below pre-recession levels despite nine months of consecutive growth. And even with fuel on the rise, there has been an undercurrent of sentiment from shippers and carriers that tonnage pertaining to retail-oriented freight will continue to increase.

“We are still cautiously optimistic about things, but the situation with gasoline prices remains the big elephant in the corner,” said Charles W. “Chuck” Clowdis, Jr., Managing Director, Transportation Consulting & Advisory Services, at IHS Global Insight. “That is becoming scary, because now consumers cannot buy [things] hauled by a truck, as more of that money is going to gasoline.”

Clowdis told LM in a previous interview that the sustained growth in retail sales does reflect a positive trend for both retail and trucking although it is cleat more work needs to be done. He added that various economic indicators are pointing in the right direction, but things like unemployment and cautious consumer spending are likely to remain in a holding pattern.

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About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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