March Retail Sales-----The Internals Are Even Worse Than The Negative 0.3% Headline

 

Retail sales numbers for March were a disastrous -0.3% despite gasoline sales which were up 0.9%

Excluding gasoline, March retail sales fell 0.4%.

Autos led the plunge down 0.4%, the fourth consecutive month.

The Bloomberg Econoday economists’ consensus estimate was +0.1% in a range of -0.4% to +0.3%. Once again economists were clueless.

Highlights

Retail sales, down a disappointing 0.3 percent in March, were pulled lower by auto sales but unfortunately do show wider weakness. Auto sales fell a very steep 2.1 percent in March and last posted a monthly gain way back in November. This is the biggest drop for vehicle sales since February last year.

In an offset, gasoline sales, boosted by higher prices at the pump, jumped 0.9 percent. Excluding just gasoline — which offers a very telling reading on consumer demand — retail sales fell 0.4 percent. Excluding both autos and gasoline, sales rose 0.1 percent which is 2 tenths below expectations.

A look at year-on-year rates helps to clarify trends in the data. Overall retail sales are up only 1.7 percent, well down from 3.7 percent in February. Excluding autos, sales are up only 1.8 percent. The best reading comes from ex-auto ex-gas which is at plus 3.9 percent for, however, a 9 tenths decline from February. The reading of the greatest concern, however, is once again excluding only gasoline where year-on-year sales slowed to plus 3.3 percent from February’s 5.4 percent.

A sign of the month’s weakness is contraction at restaurants, which like autos is a discretionary category and which fell a very sharp 0.8 percent in the month. A plus is building materials which rose a very strong 1.4 percent for a second month in gains that point to extending strength for residential investment. Other components include a sharp decline for apparel and for department stores, offset by a second straight strong gain for health & personal care.

There are upward revisions to February but they definitely do not offset weakness, despite whatever uncertainties over Easter adjustments, in the immediate month of March. This report, especially the stubborn weakness for auto sales, raises key questions over the health of the consumer, who is benefiting from low unemployment but not from wage strength. The report especially raises questions over the outlook for overall economic growth.

The Econoday recent history and outlook for today is a real hoot. Economists expected sales to sho “solid strength” except for autos.

Recent History

Weakness for auto sales is expected to hold down retail sales to only a 0.1 percent gain in March. Otherwise, sales are expected to show solid strength, at plus 0.4 percent for March’s ex-auto reading and plus 0.3 percent for ex-auto ex-gas. Growth for the core ex-auto ex-gas reading has been holding up well at a solid year-on-year trend of just over 4 percent vs roughly 3 percent for total sales. Price weakness for gasoline has held down sales at gasoline stations but a rebound, tied to the recovery in oil prices, is expected for March. This report will close out the first quarter for retail sales which in February and January, pulled down by weak vehicle sales, showed back-to-back declines.

The only solid strength was in gasoline sales. Curiously, no one blamed the weather.

In isolation, the Atlanta Fed GDPNow Model should dip into negative territory on these numbers, when reported later today.

Mike “Mish” Shedlock

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