Americans kept spending bigthrough March, effectively waving off inflation woes and pushing more gas into the US’s economic engine.
Spending at retailers and restaurants rose 0.5% last month to a record $665.7 billion, the Census Bureau said Thursday. Economists surveyed by Bloomberg expected sales to climb 0.6%. The print also showed spending slowing from February’s 0.8% gain amid new inflation pressures from the Russia-Ukraine conflict.
The February spending sum was revised to $662.4 billion from $658.1 billion, according to the report.
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Core retail sales, which exclude spending on cars and vehicle parts, rose 1.1% from February’s level, beating the median estimate for a 1% bounce. Spending at retailers exclusively rose just 0.4%, according to the report.
The data signals spending cooled for a second consecutive month as Americans pushed up against historic price growth. March saw inflation surge to an even more concerning high as Russia’s invasion dramatically lifted prices for a range of goods. The conflict and related sanctions hammered supply chains for staples like wheat, fertilizer, and nickel, raising fresh inflation concerns for food producers and manufacturers. Measures targeting Russia’s energy sector also drove gas prices to record highs in mid-March, escalating pain for Americans at the pump.
All told, broad inflation hit a year-over-year pace of 8.5% last month, according to government data published Tuesday. The one-month gain of 1.2% was also the largest since 2005, signaling price growth did anything but cool through March. Climbing prices likely played some role in the higher overall retail sales figure, but the gain was mostly fueled by Americans’ seemingly insatiable demand.
While monthly spending remains historically strong and above the pre-pandemic trend, the back-to-back slowdowns suggest the broad recovery is shifting into a lower gear. Consumer spending counts for roughly 70% of economic activity, and the retail sales report covers a hefty portion of Americans’ buying activity. The March gain is the smallest since sales shrank in December, and a prolonged deceleration in spending growth would remove some of the fuel behind the US’s rebound.
Yet a slowdown could also help with the country’s inflation problem. Prices have been soaring at an extraordinary pace for roughly a year as overwhelming demand crashes into strained supply. A cooling of that demand would likely leave businesses better equipped to bolster their inventories and help solve the imbalance.
Spending at gas stations saw the largest jump, with sales climbing 8.9% through the month. The sector likely saw the biggest impact from soaring prices. That followed a 6.7% gain the month prior and came amid an 18.3% jump in gas prices through March, according to the Consumer Price Index.
General merchandise stores enjoyed the second-largest sales increase of 5.4%, and hobby and sporting goods stores followed with a 3.3% gain.
Spending sank 6.4% at nonstore retailers, marking the largest one-month decline of any category and deepening a decline that began in February. Sales also contracted at vehicle dealers and parts stores, health and personal care stores, and department stores, according to the report.
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