Friday, April 12, 2013

Retail Sales Cool Down in March

Retail sales in the U.S. fell in March for the first time in 5 months, and posted the biggest drop in 9 months.

There are many factors at play here which we have already mentioned: higher payroll taxes, delayed tax refunds and relatively high gas prices which are causing consumers to be cautious with their spending; unseasonably cool weather which held back spring apparel and seasonal purchases; and finally the timing of Easter, which typically wreaks havoc on year-to-year comparisons.

The U.S. Department of Commerce reported that Advance Estimates of U.S. Retail and Food Services sales for March declined 0.4% from the prior month to a seasonally adjusted $418.3 billion, while sales rose 2.8% compared to the year-ago period. Year-over-year, this was the 41st straight monthly rise, but the weakest gain since November of 2009.

Total sales excluding Autos were up 2.0% compared to last March and dropped 0.4% from the prior month, while total sales less Autos and Gas Stations showed a 2.4% year-on-year increase, the weakest since February 2010, and were down a slight 0.1% from February.

Only 5 of 13 sectors posted growth over the prior month, led by Furniture & Home Furnishings Stores (+0.9% MoM / +2.8% YoY), Miscellaneous Store Retailers (+0.8% MoM / +4.4% YoY) and Food Services & Drinking Places (+0.7% MoM / +4.3% YoY).

However, weakness was apparent in discretionary categories, such as Electronics & Appliance Stores (-1.6% MoM / -3.2% YoY), General Merchandise Stores (-1.2% MoM / -4.9% YoY), and most especially at Department Stores (-1.1% MoM / -7.6% YoY) which posted a 4.9% sales decline in the first 3 months of the year compared to 2012. The last time department stores posted an annual sales gain was 2004.

It's possible this month is just a blip caused by the seasonal effect of the early Easter - last year we saw an exceptionally strong March followed by a weak April - and with falling gas prices, shoppers finally getting their tax refunds and pent-up demand for spring and seasonal goods, we could see the reverse this year.

On the other hand, the initial reading of the Reuters/University of Michigan Consumer Sentiment Index released this morning, which fell to a nine-month low, shows the perilous state of the American consumer: survey director Richard Curtin said "rising home and stock values were expected to support spending this year," but consumer's long-term outlook was gloomy "with many anticipating a higher unemployment rate and lower after-tax income in the year ahead."

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