The U.S. Commerce Department reported this morning that retail sales in March increased 0.4% amid soft auto sales; however, February was revised higher.
Ex-autos, sales were up a healthy 0.8%, and excluding autos and gasoline station sales (+2.6%), which helps to eliminate the distortion in the data caused by the spike in gas prices, so-called “core sales” increased a respectable 0.6%.
As I’ve argued in the past, $100 per barrel crude is not enough to derail the economic recovery, and March’s retail numbers bear this out.
Also, same-store sales posted by individual retailers for March were solid despite a much later Easter holiday this year, indicating that modest job growth is lending support to spending.
But job growth, though improving, is not a the level where it would provide a significant boost to consumer confidence. And as the chart above shows, the rate of acceleration in sales ex-autos and gas stations is gradually trending lower.
Gasoline’s impact
Gasoline prices that are approaching $4 per gallon are unquestionably a psychological blow, and crude briefly passed $110. According to the latest EIA data, prices now average $3.79 per gallon, or $0.93 above one year ago. And for every penny the price rises, consumers spend an extra $1 billion each year per economists estimates.
Still, let’s not forget that the U.S. economy towers over $14 trillion, and stocks, which initially sold off on tensions in the Middle East and higher crude prices, have recovered, suggesting the economic recovery is intact.
I suspect that the Easter holiday will give individual retailers a lift in April. But the summer months will provide us with a greater degree of clarity, as headwinds increase from higher gasoline prices.
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