If you're not impressed by the ongoing strength in retail sales, you should be. Or maybe you're just perplexed. In any case, consumption rose a strong 0.8% in March on a seasonally adjusted basis, the Census Bureau reports. Although that's down a bit from February's 1.0% jump, there's nary a sign in the latest numbers that the consumer is stressed or poised to give up shopping any time soon.
In fact, retail sales for the first three months of this year have delivered a strong run, given what we know about the continued deceleration in disposable personal income (DPI). Either DPI is misleading us about the future or consumption is. Only time will tell, although based on today's news it's clear that consumption has yet to give way this year to the darker side of expectations.
Is the story materially different if we ignore the short-term data? Nope, not at all. Looking at retail sales on a year-over-year basis also shows that consumption's pace is holding steady at roughly 6.5% a year. That's down a bit from the highest levels in recent years, but no one will confuse it with sluggish growth. If the business cycle is poised to bite, the message has yet to reach Joe Sixpack.
Is this an artifact of higher gasoline prices? There's no smoking gun here either. Retail sales less spending at gasoline stations rose about 0.7% last month, or up slightly from February's pace. Meanwhile, retail sales-ex gasoline continued to rise at a bit more than 6% on an annual basis through March, which is in line with the trend for much of the past year.
In short, retail sales continue to chug along at a robust pace, even after ignoring the volatile auto sector.
"There is no sign that higher fuel prices have damaged consumer sentiment and spending," Jeremy Lawson, a senior U.S. economist at BNP Paribas, tells Bloomberg. "This is enough to generate solid economic growth. We've seen the job market improve and that's boosting consumption."
Omer Esiner, chief market analyst at Commonwealth Foreign Exchange, finds nothing in today's numbers to suggest otherwise. "It's a clear sign that U.S. consumer spending remains strong," he notes via Reuters. "On balance I think it's the latest sign here that the U.S. economy is outpacing a lot of its major counterparts in recovery."
If you're inclined to argue differently, you won't find any statistical support in today's retail sales update.