Q1 is almost in the books and so far it’s been a weak quarter for retail sales. At 8.30 AM today the Department of Commerce delivers the last piece in the puzzle. Expectations in the market are a small 0.1 increase in the headline number but the main event is not the only interesting thing to look out for. Here are five things to watch in today’s report.
- Increased gasoline prices
It’s been the story for a while now. Low gasoline prices have been one of the key negatives for several months but the narrative seems to be slowly shifting. Gasoline prices are starting to increase and while car owners might be sad to discover that, it’s expected to be a positive influence on this month’s numbers since consumers are spending more money on gasoline and the extra money spend here will not yet be withdrawn from other categories.
“Consumers are not adjusting their purchases very quickly and the increase in gasoline prices doesn’t limit spending in other areas right away,” said Dana Saporta, director of US Economics Research at Credit Suisse.
- Motor vehicle sales
Auto sales performed on solidly in march but for the first time since June 2015 the seasonally adjusted annual sales rate fell below 17 million. This was not expected among economists and focus is now weather tailwind has gone into headwind in the motor vehicle category.
“We are going to see the extent of the weakness in motor vehicle sales, and focus is on how deep the drop in March was,” said Saporta.
What was initially reported, as a decent 0.2 percent opener to the year was later revised into a 0.4 percent decline. This devastating revision added mystery to the current strength of the economy and even though there’s always a seat at center stage reserved for revisions, adjustments will be monitored very close this month.
“Numbers are adjusted for the early Easter, but it’s always tough to get that exactly right so there might be some noise,” said Scott J. Brown, senior VP and chief economist at Raymond James Financial in Florida.
- Personal consumption pattern
Consumer spending is driving 70 percent of the economic outlook in the country and even though it hasn’t been a disaster, consumers are not spending as much as economist would have hoped. At least not in department stores. But wages are starting to pick up the pace, jobs are strong and it is expected to have an impact on consumer spending.
However the relatively strong performance in a category like sporting goods, hobby, book and music stores suggests patterns that people are spending their money on something else and it’s worth keeping an eye on some of these categories.
“There is a generational issue in consumer spending,” said Brown. “Millennials are more into experiences that just buying stuff. The strength in spending is showing up in restaurants, travels, music and sporting events.”
- Continued strong sales online
Purchases online have had a strong year but along with almost every other category Nonstore retailers experienced a decline in February. One month doesn’t make a trend so March will prove a strong guide for the path ahead.
“Components are always going vary but I expect that we continue to see a strong online sales and a remaining stagnation in department stores,” Brown said.