The Commerce Department said Monday that retail sales rose 0.8 percent in March. Excluding vehicles, retail sales rose 0.8 percent and excluding gasoline, retail sales rose 0.7 percent.
I have been saying for months now that I don’t expect people to “shop ‘til they drop” anymore. I will be happy if they simply “shop ‘til they’re tired.”
Guess what? That is happening. Retail sales soared in the March with stores in just about every category recording sharp increases over February levels.
And let’s not forget, the February spending was strong. Indeed, lasts month’s great performance was chalked up to warm weather. That does not seem to be the case as the March sales pace was not that far behind the 1 percent February rate.
Where the weather might have mattered was in building and garden supplies, which posted a massive 3 percent rise.
Watch for that to turnaround to some extent in April. But we bought clothes and appliances and electronics and furniture and motor vehicles and sporting goods and, well everything. A sharp increase in gasoline sales was price driven but even if you exclude that component, demand was still up strongly.
The nice weather may have also eased the pain of life a little as healthcare purchases were off, but otherwise, we simply went shopping.
There were two other reports released Monday. The National Association of Home Builders/Wells Fargo builder confidence index fell in April. It appears that buyers are not signing contracts as rapidly as hoped for. That does not bode well for housing starts. The New York Fed’s Empire State manufacturing index also declined and the drop was sharp. New York, however, is hardly the center of the manufacturing world so I am not that worried about this report.
This was a blockbuster report that was well above consensus. It shows that people are becoming more confident about the future as consumption is growing faster than income. The breadth of the retail sales rise in heartening as it cannot be dismissed as being driven by temporary vehicle or gasoline purchases. It is real.
This report should cause estimates of first quarter growth to be revised upward. I have been near the top of all forecasts for months at about 3 percent but it is possible that the number could come in above that pace.
Investors should like this report though the weakening builders’ confidence and drop in the New York manufacturing index could create some uncertainty.
The reality is that the economy is building a positive cycle of growing demand, improving labor market conditions and rising confidence which can only lead to more spending and hiring.
Unfortunately, until home construction accelerates, it will be difficult to get to really strong growth. I will take 3 percent, though, as that level is enough to keep the upward trend in the recovery going.
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