U.S. retail sales continued to show resilience in March, marking the second consecutive month of growth and underscoring the strength of the U.S. consumer, supported by a robust job market. According to the Commerce Department‘s report, U.S. retail sales rose by 0.7 percent in March compared to the previous month, slightly slower than February’s upwardly revised 0.9 percent gain. This exceeded economists’ projections of a 0.4 percent increase, indicating sustained momentum in consumer spending. Retail spending has now increased in seven of the past 10 months through March.
U.S. retail sales saw an increase across several categories in March, with notable gains at gas stations (up 2.1 percent), online retailers (up 2.7 percent) and specialty stores (up 2.1 percent). Spending at restaurants and bars also rose by 0.4 percent last month. However, sales of electronics, clothing and sporting goods experienced declines of 1.2 percent, 1.6 percent and 1.8 percent, respectively.
Impact on monetary policy
The strong U.S. retail sales figures in March are evidence of a solid U.S. economy, keeping the Federal Reserve cautious about adjusting interest rates. With inflation showing signs of stalling in recent months and the economy exhibiting momentum, Fed officials are maintaining a wait-and-see approach regarding rate adjustments.
Interest rates remain at a 23-year high after the Federal Reserve started raising rates two years ago. Moreover, major banks pushed their expectations for an interest rate cut from June to July with some expecting the first cut to occur in December.
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Retail spending forecasts
Economists anticipate that robust U.S. retail sales will persist throughout the year, supported by a strong job market. Despite elevated inflation and interest rates, Americans have maintained solid spending habits. The job market remains healthy, with employers adding a significant 303,000 jobs in March and the unemployment rate falling to a low of 3.8 percent. Therefore, as long as the U.S. job market remains healthy, spending and retail sales will continue to grow. Notably, the U.S. job market is now at its strongest with job growth expanding for the 39th month in a row and unemployment declining below 4 percent for over a year.
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