MNI REALITY CHECK: Bounce On The Cards For US Retail Sales

U.S. March retail sales should get a boost from fresh stimulus and job growth through the month, industry experts told MNI, although some of that improvement came from pent up demand after winter storm disruptions depressed sales in February and isn't necessarily indicative of the coming months' sales pace.

March saw a "perfect alignment" of positive factors like fresh stimulus, strong employment growth, and increased household mobility as vaccines became more widely available and state economies continued to reopen, said Jack Kleinhenz, chief economist at the National Retail Federation.

Put together, those factors will translate into a "very, very strong March" for retail spending, he said.

Direct payments of USD1,400 included in the Biden administration's USD2 trillion Covid-19 relief bill went out to most eligible Americans in early-to-mid March, well-within the data collection period for Thursday's retail sales report from the Commerce Department. That should support spending on more expensive goods.

"If you get a fourteen-hundred dollar stimulus payment, and you've not been able to spend money throughout the year, you certainly have the purchasing power to really back spending on large-ticket items" like furniture, he said. Sales at food and beverage stores through March should also see some strength as consumers prepared for the Passover and Easter holidays.

Kleinhenz said despite robust retail spending in March, the composition of spending is likely to shift away from goods toward services later this year as restaurants and the like lift capacity restrictions and air travel picks up.

NEW VEHICLE SALES SURGE

Consumers who received a check from the government are more likely to spend their money on large purchases like vehicles, said Charlie Chesbrough, senior economist at Cox Automotive, the parent company of online vehicle retailers Kelley Blue Book and Autotrader.

New vehicle sales in March rose to a seasonally adjusted annual rate of 17.7 million, Chesbrough said, citing data from Cox. That's up from 15.8 million in February, though it's likely that severe winter storms pushed some buying activity into March, making "February look a little bit worse and March look a little bit better," he said, adding that the pace isn't likely to be maintained.

Tight inventories due to plant shutdowns and ongoing supply chain disruptions could also hamper sales into Q2, he said. That's also driving the price of a new car higher, pricing most average Americans out of the market.

But Chesbrough still expects sales to grow through the spring, driven mostly by fresh federal aid.

APPAREL

Apparel sales in March likely surged as both brick and mortar and e-commerce stores saw "really positive increases," said Gary Raines, chief economist at the Footwear Distributors and Retailers of America, a Washington-based trade association representing more than 90% of the U.S. footwear industry.

"The March numbers are going to see a really impressive increase," he said, and "that's likely to last through the second quarter." But year-over-year footwear and apparel sales should moderate in Q3, when retailers a year earlier reopened after the first Covid-19 lockdown. That should be a "truer reflection" of year-over-year changes, he said.

Headline retail sales are expected to increase 5.8% after falling 3% in February, according to Bloomberg. Excluding vehicle sales, retail sales should rise 5%, recovering from February's 2.7% decline. The control group is expected to see a 7.2% increase following a 3.5% decline in February.