March Retail Sales and Q1 Consumer Spending
Retail sales, scheduled for publication on April 14, are expected to have advanced 0.3% in March after a 0.1% drop in February and a 1.8% increase in January. Excluding autos, gasoline, and building materials, retail sales rose 1.7% and 0.5% in January and February, respectively. Unit auto sales increased to an annual rate of 9.83 million units in March from 9.12 million in the prior month. Expenditures on building materials are excluded because they are in the residential investment expenditures component of GDP. Price swings dominate the purchase of gasoline which explains the exclusion of this component in evaluating the underlying strength of retail sales.
Inflation adjusted consumer spending, which includes outlays on services, moved up 0.7% in January and dropped 0.2% in February. The strength in consumer spending in January is providing a lift to overall consumer spending in the first quarter. The retail sales report for March should give more clues about consumer spending in March.
If retail sales exceed expectations in March, the headline GDP forecast for the first quarter stands to be revised further after the significant narrowing of the trade deficit in February last week led to a reconsideration of the projected growth of real GDP in the first quarter. Stay tuned for an analysis of the retail sales report on April 14.
