March Sees Surprising Surge in US Retail Sales, Brightening Q1 Outlook

In March, US retail sales exceeded projections, adding to the indication of a robust performance for the economy in the initial quarter of 2024.

Marking a notable increase, retail sales escalated by 0.7% month-on-month in March, surpassing February’s 0.9% surge, which was revised upward from 0.6%, and outpaced the anticipated 0.3% growth.

This encouraging report comes on the heels of March’s robust employment figures and strengthens the belief that the Federal Reserve may postpone interest rate cuts this year.

Annualized retail sales climbed to 4.0% last month, up from February’s 2.11%, while core retail sales, excluding automobiles, gasoline, building materials, and food services — a metric closely aligned with consumer spending in the GDP — soared by 1.1% in March. This marked a significant increase from February’s upwardly revised 0.5% rise and comfortably exceeded the 0.3% consensus.

Despite mounting inflation and borrowing costs, consumer spending in the US continues to exhibit robust momentum, buoyed by a tight labor market and rising wages, which offset the potential impact on households from reduced income.

Economists anticipate that spending may decelerate from the fourth quarter’s pace. However, it’s expected to remain sufficiently robust to contribute to the projected 2.4% economic growth in the first quarter, following the 3.4% expansion in the final quarter of 2023.