E March Retail Sales May Signal Further Economic Slowing

It was another ugly retail sales report for the month of March and with February’s retail sales being revised sharply lower as delivered by the U.S. Commerce Department. Combined, February and March marked the worst two-month stretch in two years, suggesting that first-quarter U.S. growth will be less robust than previously hoped. Sales at retailers nationwide declined 0.2% last month, mostly because of cheaper gas and incentives by car dealers and slower-than usual issuances of tax refunds. To make matters worse, the February retail sales results were revised lower from a .1% to negative .3 percent.  That’s quite the revision and largely unexpected by most economists.



What was not unexpected in the March retail sales tally was the continued outperformance of nonstore retailers when compared to its brick and mortar peer group. Nonstore retail sales rose .6% MoM and a blistering 11.9% YOY. With nonstore retailers performing well this naturally came at the expense of the worst performing category YOY, department store retail sales. Department store retail sales fell 4.5% YOY while rising a modest .2% MoM for the month of March. Gas station sales fell MoM but soared YOY by 14.3 percent. This, as auto sales rose 6.1% YOY but fell 1.5% MoM. If autos and gas are excluded, retail sales rose 0.1% last month, the Commerce Department said Friday. And sales on that basis are up a solid 4.1% in the past year.

Despite the rather poor two-month stretch for retail sales, some economists are expecting a near-term bounce back with consumer confidence surveys showing positive sentiment. Most economists expect retail sales to accelerate soon in light of high steady hiring gains, rising wages and the arrival, albeit late, of most 2016 tax refunds.

In terms of retail sales and the trending consumer spending habits, department store retailers continue to witness the shift toward nonstore/digital sales.  Month-after-month and year-after-year the trend has failed to curtail in favor of department store retailers. It’s why in 2017; store closures will rise above levels seen in 2008. 

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