March Retail Sales: In like a lion, out like a pride of lions

Summary

Retail sales shot up 9.8% in March, handily exceeding consensus expectations in what will go down as the second-best month on record for retailers, exceeded only by the reopening last May. Control group sales rose 6.9% and point to a robust pace of goods spending in the first quarter.

Source: U.S. Department of Commerce and Wells Fargo Securities

Good day sunshine: Better weather and better days for retailers

March started out with retailers still under pressure from February's deep freeze which put a chill on spending activity, but consumers hit stores in March with a pocketful of money and eager to make up for lost time.

The 9.8% increase in overall retail sales during the month is exceeded only by the surge tied to the reopening of the economy in May 2020 after the lockdowns (see chart). Said differently, the three largest monthly percentage gains on record for retail sales have occurred in the past 10 months. Don'tcall it base eects either—the level of retail sales is a stunning 17% higher than it was before the pandemic hit (see chart). In data going back to the 1990s, retail sales have never exceeded 12% onyear-over-year basis. With consumers still sitting on a pile of accumulated savings combined with the expected reopening of the service economy this summer, our forecast looks for a consumer spending boom this year that will rival any in living memory for most Americans.

Broad advance across retailers

Everybody wins when consumers are flush with stimulus checks. dithout exception, every store type posted better sales in March with the top-spot going to sporting goods stores right in time for the resumption of outdoor sports. As the chart below shows, sporting goods stores have been the top-winner during the pandemic, with sales 44% above where they were at the peak of retail sales prior to the COVID outbreak.

It was a good month at last for the clothing stores and apparel retailers that were able to survive what has been a terribly difficult year, as these clothing stores saw sales shoot up 18.3% from February.

As the weather in March improved from the freezing weather in February, dining igloos and yurts gave way to patios and socially distanced sidewalk tables. The increased traffic at bars and restaurants is showing up in the data as well with this category boasting a 13.4% increase in March. The long-awaited rebound is good for the hospitality sector, but grocery stores had to settle for a comparatively scant monthly increase of 0.5%. That could be a pre-cursor of a theme this year in which the high times for grocery stores gradually winds down as people go out to eat again. Restaurants are the only store type still underwater from where they were before the pandemic; although one more good month will put them in the black.

Other notable mentions include motor vehicles and parts which posted a 15.1% increase in March. We are not rushing to judgement on autos because the story here is complicated by supply chain disruptions and availability of vehicles. Building materials and garden stores more than bounced back after a soft February with a 12.1% pick up in March.

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