Retail sales rise 0.5% in March

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NEW YORK — Retail sales edged up in March, but rising prices for food, gasoline and other basics took a big chunk out of consumers’ wallets.

Retail sales rose 0.5% after posting a revised 0.8% increase from January to February, the U.S. Commerce Department reported Thursday. Spending was fueled by wage gains, strong hiring and more money in bank accounts. January’s 4.9% increase was the largest increase in spending since March 2021, when U.S. households received a final federal stimulus check of $1,400. But soaring prices on everything, especially at the gas pump, are making shoppers more selective about how they spend their money.

Excluding an 8.9% increase at gasoline stations, overall retail sales fell 0.3% last month.

Overall, the retail sales picture was mixed, but shoppers still showed resilience in their spending, economists said. General merchandise store business increased 5.4%, while clothing store sales increased 2.6%. Restaurants saw a 1% increase. But online sales fell 6.4%, while auto sales fell 1.9% as automakers faced a shortage of vehicles. Major retailers will release quarterly earnings reports next month, which will give a more complete picture of the state of the consumer.

“They’re spending selectively this month, and soaring gasoline prices due to the Russian-Ukrainian war are driving most of the spending,” said Christopher S. Rupkey, chief economist at the research company FWDBONDS LLC.

But he said: ‘Inflation is not going away, but it will probably stop getting worse and that means less headwind for spending.’

Neil Saunders, managing director of GlobalData Retail, agreed that shoppers are nervous about inflation. He said online shopping was taking a hit because he believed it was more discretionary and easy to cut. He also thinks the online pick-up could be a consequence of shoppers pricing in higher shipping costs.

The retail report only covers about a third of overall consumer spending and does not include services such as haircuts, hotel stays and airline tickets, areas that have rebounded from the depths of the pandemic.

Retailers are closely watching Russia’s war with Ukraine and how it could weigh on buyer confidence but also worsen inflation. The conflict has already limited supplies of wheat, vegetable oils and electronic components like microchips. This has pushed up fertilizer prices that were already high, made scarce supplies even harder to find and squeezed farmers, especially those in developing countries. In addition to the Russian invasion, rising covid-19 cases and renewed restrictions in China could exacerbate supply chain issues.

The Department of Labor said on Tuesday that its consumer price index jumped 8.5% in March from 12 months earlier, the biggest year-on-year increase since 1981. Prices rose been pushed up by bottlenecked supply chains, strong consumer demand and disruptions to global food and war-aggravated energy markets. From February to March, inflation rose 1.2%, the biggest month-over-month jump since 2005. Gasoline prices drove more than half of that increase.

According to AAA, the average price of a gallon of gas – $4.07 – is up 42% from a year ago, although it has fallen over the past two weeks.

The March inflation figures were the first to fully capture the spike in gasoline prices following Russia’s February 24 invasion of Ukraine. Moscow’s attacks triggered far-reaching Western sanctions against the Russian economy.

The acceleration of inflation occurs in an otherwise strong economy. In March, employers added 431,000 jobs, the 11th consecutive month in which they added at least 400,000. For 2021, they added 6.7 million jobs, the most on record. Additionally, job openings are near record highs, layoffs are at their lowest level since 1968, and the unemployment rate is just above a half-century low.

Matt Shay, chief executive of the National Retail Federation, the nation’s largest retail group, said “consumers are adapting and shopping smarter for themselves and their families.” He believes consumer strength can carry the economy through this economic uncertainty if policymakers implement measured policies and “do not overreact to current conditions.”

NRF said the challenge for the Federal Reserve is to cool demand without pushing the economy into a dramatic downturn.

To protect against any drop in consumer spending, retailers are reducing spending, while taking a measured approach to ordering merchandise and adding surcharges.

Amazon announced on Wednesday that it would add a 5% “fuel and inflation surcharge” to the fees it charges third-party sellers who use the e-commerce giant’s fulfillment services. The Seattle-based company said on its website that the additional fees, which take effect April 28, are “subject to change” and will apply to wearable and non-wearable items.

Gary Friedman, CEO of high-end furniture chain RH, formerly known as Restoration Hardware, told analysts in late March that the company had seen consumer demand weaken during the company’s first quarter. , which began in late January, which coincided with Russia’s war with Ukraine.

“I don’t think anyone really understands how much prices are going to go up everywhere, in restaurants, in cars, in everything,” Friedman said. “If you’re going into a very difficult unpredictable time, you just have to be super flexible. You have to be able to improvise, adapt, overcome and be ready for anything.”

Information for this article was provided by Paul Wiseman of The Associated Press.

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