The March retail sales report will show whether consumers remain willing to spend and fuel the economy through their shopping habits. Economists expect the numbers reported Monday to be up 0.4%, according to Bloomberg, which would be a softening from the month before. The early data suggests moderate growth in retail sales, “but not boom-like numbers,” said Stan Shipley, managing director at Evercore ISI. Here are five things to watch in the report:
- Gas Prices
Gas prices increased in March, which was expected to be a driving force behind any growth in consumer spending last month. But that doesn’t mean consumers were buying more gas, only that the gas they purchased cost more. The average gas price on Friday was $3.634, up from $3.256 a month ago, according to the AAA. The increase in gas prices could offset lower automotive sales.
- Easter Eggs
The Easter holiday adds a layer of volatility to the retail sales report compared to other months. Even though the Commerce Department adjusts for the holiday, it is difficult to do so accurately because Easter falls on a different day every year. If the report does show a big swing in either direction, it may be due to the holiday and adjustments. “It kind of is pretty difficult,” said Kevin Cummins, chief U.S. economist at Natwest Markets. “There’s no clear bias if you look back.”
- Tale of Two Classes
Part of the strong consumer spending last year was fueled by excess savings from the pandemic, including stimulus payments. Wealthy consumers still have that cushion and are spending, but lower-income folks have largely spent those savings. “The McDonald’s of the world are going to start to suffer here, while other high-end retailers will do OK,” Shipley said.
- Eating Out
Americans spend most of their money on services, from haircuts to gym memberships, but the retail sales report focuses largely on goods. There’s one service category in the report – bars and restaurants. That makes eating and drinking out a key indicator of consumer strength: If Americans are still ordering entrees and drinks, they are also confident in their finances to pay the tab. In February, spending at food services and drinking places ticked up 0.4%.
- Interest in Rates
All eyes are on the Federal Reserve Board’s decision on interest rates later this year. But last week’s report showing that the consumer price index is up 0.4%, pushing inflation up to 3.5%, will outweigh any impact that retail sales could have on the June meeting. However, weaker retail sales numbers over the next several months could concern the Federal Reserve governors, and potentially cause them to lower rates. It would be a much more challenging situation if inflation remained high and the economy was slowing. “They don't want to overdo it and they don't want to engineer a recession,” Cummins said.