Retail sales in the U.S. jumped by the most since September 2017 and first-time filings for unemployment benefits dropped to a fresh 49-year low, as a strong labor market gives American consumers the wherewithal to keep the economy chugging along.
The value of overall sales in March rose 1.6% month over month on an adjusted basis, boosted by gains in motor vehicles and gasoline stations, after an unrevised 0.2% decrease the prior month, according to Commerce Department figures released Thursday. That exceeded all forecasts in Bloomberg’s survey calling for a 1% gain.
Nonstore retailers held up with a second-straight 1.2% monthly rise, as sporting goods and hobby stores saw the lone decline. Nonstore sales include online retailers and other retailers such as catalogers and call centers. Nonstore sales grew 11.6% year over year.
A Labor Department report released at the same time showed initial jobless claims fell last week to 192,000, the lowest since September 1969. Economists had projected an increase.
“The labor market is alive and well,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC. Income gains support consumer spending and “as long as the labor market is doing well there is good reason to expect consumer spending should do fine.”
With first-quarter gross domestic product figures due April 26, the surprisingly strong retail report may spur economists to further increase projections. Analysts raised economic growth forecasts for the period Wednesday after a report showing the trade deficit unexpectedly narrowed in February.
The stronger data signals consumers may continue to drive the expansion amid solid wage gains, low unemployment, and policy makers indicating interest rates will remain on hold this year. The rebound, after a December plunge, may help offset an inventory overhang that’s poised to weigh on growth later this year.
“Retail sales ended 2018 abysmally and began 2019 extraordinarily,” Jefferies LLC economists Ward McCarthy and Thomas Simons wrote in a note. “With a boost from January and March, the consumer sector will be a source of growth again in the first quarter.”
Automobile dealer sales rose 3.1%, the most in 18 months, after a drop the prior month. Industry data from Ward’s Automotive Group previously showed unit sales rebounded in March.
Twelve of 13 major retail categories increased. Sales at clothing stores increased 2%, the most since May, while food services posted a 0.8% gain, the best since July.
What Bloomberg’s Economists Say
“Stronger-than-expected retail sales in March that spanned multiple discretionary spending categories confirm that the slowdown at the start of the year was temporary… As transitory factors abated—including a lengthy government shutdown and a shock to household confidence in response to the fourth-quarter market rout—consumer spending recovered in full force.”- Yelena Shulyatyeva and Carl Riccadonna, economists.
Federal Reserve officials, who have signaled they will remain patient on any policy rate changes amid low inflation and gathering uncertainty, will be watching for indications whether consumer spending gains are likely to be sustained over time.
Sales in the “control group” subset, which some analysts view as a cleaner gauge of underlying consumer demand, climbed 1% and topped projections. The measure excludes food services, car dealers, building-materials stores and gasoline stations.
A separate report Thursday showed the Bloomberg Consumer Comfort’s monthly gauge of economic expectations climbed to 50 from 47.5, the second increase in the last six months, as more respondents said the economy is getting better. The weekly comfort measure also rose as measures of personal finances and buying climate increased.
Sales at filling-stations increased 3.5%, in line with the prior month, the report showed, as oil prices rallied. Another Labor Department report this month showed gas prices rose 6.5% in March, the most since September 2017.
National Retail Federation estimates
Meanwhile, the NRF also reported Thursday that retail sales were up 1% in March seasonally adjusted from February and up 0.8% unadjusted year-over-year. The numbers exclude automobile dealers, gasoline stations and restaurants. Online and other nonstore sales were up 9.2% year-over-year and up 1.2% month-over-month seasonally adjusted, the NRF says.
“March’s numbers are very encouraging and set the stage for improved expectations for the economy in the coming months, especially since the first quarter is typically weak,” NRF Chief Economist Jack Kleinhenz said. “These numbers boost first-quarter performance and suggest a strong consumer. It is clear that underlying consumer fundamentals including job and wage growth and healthy household balance sheets continue to support spending. Consumers were busy in March after weaker-than-expected spending earlier.”
Kleinhenz said the numbers could have been better if not for cold weather early in March and changes in the timing of two key religious holidays: “The change of seasons is always a factor because of the weather, and a later Easter and Passover this year mean holiday-related sales that took place in March last year won’t come until April this year and sizably impact year-over-year comparisons.”
As of March, the three-month moving average was up 2.6% over the same period a year ago. March’s results make up for a revised monthly loss of 0.8% seen in February and build on February’s year-over-year gain of 2.5%.
NRF’s numbers are based on data from the U.S. Census Bureau. The release of retail sales data for December through March has been delayed as the Bureau works through a backlog caused by the government shutdown earlier this year. The results come as NRF’s preliminary forecast projects that retail sales during 2019 will increase between 3.8% and 4.4% to more than $3.8 trillion. The forecast is subject to revision as more data is released in the coming months.