(The Hill) – Retail sales in the U.S. fell 1 percent from February to March, according to Census Bureau data released Friday, a sharp drop signaling that the economy is slowing faster than expected.
Analysts had predicted retail sales to fall 0.4 percent. Sales figures were down despite consumer prices rising 5 percent annually in March, indicating that sales volumes are seeing even steeper declines.
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Spending is up just 2.9 percent compared to last year. But adjusted for inflation, retail sales are down 2 percent annually, according to EY Parthenon senior economist Lydia Boussour.
“In other words, consumers are spending more dollars but are getting less goods or dining out less than in March last year,” Boussour said in an analysis.
Consumers are increasingly pulling back their spending following years of consistent price hikes and elevated borrowing costs brought on by the Federal Reserve’s interest rate hikes.
Gas stations, other retailers see huge dip
Spending at gas stations fell 5.5 percent last month, the biggest drop of any category, amid falling oil prices and weaker demand. Sales were down 14.2 percent compared to March 2022.
Sales at general merchandise stores, which sell a broad range of items, fell 3 percent last month.
The report indicates a pullback in spending on pricier products. Sales of electronics and appliances plummeted 2.1 percent in March and 10.3 percent on the year. Furniture store sales fell 1.2 percent last month and declined 2.4 percent on the year.
Clothing store sales fell 1.7 percent in March. The industry had been propped up by luxury sales, but luxury clothing giant LVMH warned this week that U.S. demand is starting to soften after years of big spending.
Spending at car dealerships fell 1.5 percent last month. The industry has finally moved past pandemic supply chain snags, and demand is falling. In March, the transaction price of new vehicles fell below manufacturers’ suggested retail price for the first time in 20 months, according to Kelley Blue Book.
“While job and income gains remain strong, the cracks in the consumer sector are widening and a negative shift in hiring activity could be the final blow to place the economy in a recession,” Nationwide senior economist Ben Ayers said in a note.
Online spending a rare bright spot
Retail spending online rose 1.9 percent in March and 12.3 percent annually, reflecting the continued strength of e-commerce. It’s one of the few categories that rose last month.
“We know that shoppers are increasingly drawn to online channels where it’s easier to find deals and discounts,” Claire Tassin, retail and e-commerce analyst at Morning Consult, said in a note.
Spending at grocery stores remained flat in March as food prices finally declined. Sales at health and personal care stores rose 0.3 percent on a month-to-month basis.