Ed Kashmarek - The Everyday Economist
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Retail Sales Fall in March on Plunge in Vehicle Sales

4/19/2017

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​Retail sales fell 0.2% in March from the prior month, missing the consensus forecast of no change, following a 0.1% increase in February. Sales excluding autos were unexpectedly flat, while sales excluding autos and gas rose 0.1%, also less than expected. On a year-over-year basis, sales were up 5.1%, down slightly from February’s 5.2% pace.
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Food and beverage sales rose the most in dollars from the prior month, increasing by $308 million, or 0.5%. Non-store sales came in a close second, rising by $302 million, as purchasing online continues to be a more common way to shop. Grocery sales followed with a $254 million increase. Electronics and appliances led the way on a percentage basis, as sales rose $212 million, or 2.6%. Strength was also seen in miscellaneous goods (+1.8%) and clothing (+1.0%). The biggest decline in dollars came from vehicle sales, which plunged by $1.3 billion, or 1.5%. Building and garden supply sales followed with a $474 million, 1.5%, decline, while gasoline sales fell by $354 million, or 1.0%. These percentage declines were also the largest of all of the categories.

​Sales were higher on a year-over-year basis, led by a $5.4 billion, or 12.3%, increase in non-store sales. Vehicle sales were a close second with a $5.3 billion, or 6.4%, rise in sales, followed by a $4.4 billion, or 13.7%, increase in gasoline station sales . Thus, while lower vehicle and gasoline sales were major factors in weak overall sales in March, they were big factors in the year-ago comparisons. The largest dollar decline in sales was seen in department stores, where sales were down $620 million, or 4.7%, which was also the biggest percentage decline. 
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If we take out the impact of gasoline sales, which are not really an indication of stronger or weaker economic growth but rather due to changing gas prices, ex-gas retail sales were up only 4.5% from a year ago in March. If we also adjust for inflation, we see that real ex-gas retail sales were up 2.1% in March, a nice rebound from February’s moribund 1.3% growth rate. This measure of retail sales growth, which went negative a year before the headline number leading up to the Great Recession, has been trending down over the last two years. Unfortunately, March’s rebound was not enough to break that trend.

​This report, along with the unexpected decline in consumer prices in March, may give the Fed some pause at its next rate setting meeting in May. Weak March data suggests a rate increase is less likely than a few weeks ago.
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