Retail Sales Rose 9.8% in March as Consumers Spent Stimulus Checks

March consumer prices, retail sales, industrial production, & new home construction; February’s business inventories RJS at MarketWatch 666

Seasonally adjusted retail sales increased by 9.8% in March, the second largest jump on record, after retail sales for January and February were both revised higher…the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled a record high $619.1 billion during the month, which was up by 9.8 percent (±0.5%) from February’s revised sales of $529.3 billion and 27.7 percent (±0.7 percent) above the adjusted sales in March of last year… February’s seasonally adjusted sales were revised from $561.7 billion to $563.7 billion, while January’s sales were revised from $579.1 billion to $579.552 billion; as a result, the percent change from January to February was revised from down 3.0 percent (±0.5 percent) to down 2.7 percent (±0.2 percent)….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were actually up 27.3%, from $493,085 million in February to $627,885 million in March, while they were up 30.4% from the $481,513 million of sales in March of a year ago…

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the March Census Marts pdf….the first double column of this table shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month’s March “advance” report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column; the second double column pair below gives us the revision of the February advance estimates (now called “preliminary”) as of this report, with the new January to February percentage change under “Jan 2021 r” (revised) and the February 2020 to February 2021 percentage change as revised in the 2nd column of that pair…(for your reference, our copy of this same table from the advance February estimate, before this month’s revisions, is here)…. lastly, the third pair of columns shows the percentage change of the first 3 months of this year’s sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of the 1st quarter a year ago….as you can see from that fifth column, overall retail sales for the 1st quarter of 2021 were roughly 7.7% higher than the 4th quarter of 2019, which implies that nominal personal consumption of goods for the 1st quarter will be up by roughly the same amount, before any inflation adjustments…

To compute March’s real personal consumption of goods data for national accounts from this March retail sales report, the BEA will use the corresponding price changes from the March consumer price index, which we just reviewed…to estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals…from the third line on the above table, we can see that March retail sales excluding the 10.9% price-related increase in sales at gas stations were up by 9.7%….then, removing the 0.7% increase in grocery & beverage sales and the 13.4% increase in food services sales out from that total, we find that core retail sales were up by almost 10.9% for the month…since the March CPI report showed that the the composite price index of all goods less food and energy goods was 0.1% higher in March, we can thus figure that real retail sales excluding food and energy will show an increase of around 10.8% . . . however, the actual adjustment in national accounts for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at sporting goods and other recreational commodity stores were up 23.5%, the March price index for transportation commodities other than fuel was 0.2% lower, which would mean that real unit sales at sporting goods and other recreational commodity stores were probably on the order of 26.4% higher, once the price increase is taken into account . . . similarly, while nominal sales at clothing stores were 18.3% higher in March, the apparel price index was 0.3% lower, which means that real sales of clothing likely rose around 18.6%…on the other hand, while sales at furniture and home furnishing stores were 5.9% higher, the price index for household furnishings and supplies was was 0.4% higher, which means real sales of furniture and home furnishings only rose by around 5.5%..

In addition to figuring those core retail sales, we should adjust food and energy retail sales for their price changes separately, just as the BEA will do…the March CPI report showed that the food price index was 0.1% higher, as the price index for food purchased for use at home rose 0.1% while the index for food bought away from home was also 0.1% higher, as prices at fast food outlets rose 0.5% and prices at full service restaurants rose 0.2%…hence while nominal sales at food and beverage stores were 0.7% higher, real sales of food and beverages would be around 0.6% higher in light of the 0.1% higher prices…on the other hand, the 13.4% increase in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants rose around 13.0% during the month…and while sales at gas stations were up 10.9%, there was a 9.1% increase in price of gasoline during the month, which would suggest that  real sales of gasoline were up on the order of 1.6% or 1.7%, with a caveat that gasoline stations do sell more than gasoline, products which should not be adjusted with gasoline prices, so the actual increase in real sales at gas stations was likely greater…reweighing and averaging the real sales changes that we have thus estimated back together, and excluding food services, we can then estimate that the income and outlays report for March will show that real personal consumption of goods rose by around 8.9% in March, after falling by a revised 2.9% in February and rising by a revised 7.8% in January…at the same time, the 13.0% increase in real sales at bars and restaurants would boost March real personal consumption of services by more than 1%…

Now that we have estimates of the percentage change in PCE goods for all three months of the first quarter, we can also estimate the contribution that PCE goods will make to 1st quarter GDP…. the February income and outlays report gives the change in real PCE goods for the 4th quarter months as unchanged in October, down 1.2% in November, and down 2.2% in December . . . based on the revisions to retail sales in the March retail report, we now have PCE goods for January at +7.8%, PCE goods for February at -2.9%, and PCE goods for March at +8.9%…to simplify our calculations, we’ll now convert percentage changes in PCE goods into an index, and set October with an index value of 100.00…thus Nov = 98.80, Dec = 96.63, Jan = 104.17, Feb = 101.15, and March = 110.15…hence, to figure out the growth rate of 1st quarter PCE goods, we have this calculation ( ((104.17 + 101.15 + 110.15) / 3)/ ((100 + 98.8 + 96.63)/ 3)) ^ 4  = 1.30021  …that means that PCE goods rose at about a 30.0% annual rate in the 1st quarter…since PCE goods has usually been around 23% of GDP, that means the contribution of PCE goods alone to first quarter GDP will be around 6.90 percentage points…