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April 16, 2025

Retail and food service sales rose a robust 1.4% in March, matching consensus expectations. That was the largest such gain in over two years.  Sales at motor vehicle dealers surged 5.7% in March. That rise was expected based on the previously reported 1.67 million unit increase in light vehicle sales in March. Consumers rushed to vehicle dealers to beat the well-publicized price increases and incentives that the vehicle producers added ahead of those tariffs.

Nearly all of the increase in vehicle sales occurred after tariff announcements late in the month. Dealer lots remained packed, while consumers scrambled to get repairs and maintenance in ahead of higher tariffs on parts.

Sales at food and drinking places rose a solid 1.8% in March after a sharp 0.8% drop in February.  A return to more seasonable weather allowed consumers to get out and about. Excluding food and drinking places and automobile dealers, retail sales rose a still solid 0.3%.

Sales were supported by consumers aiming to beat tariff-induced price increases on items subject to high tariff rates, among them sports equipment and electronics. Sales at sporting goods, hobby, book and music stores jumped 2.4% in March, after falling the prior two months.  Sales at electronics and appliance stores increased 0.8% in March and rose at a 4.6% annualized rate over the prior three months.

Sales at building materials, garden equipment and supply dealers rebounded a sharp 3.3% in March, after falling 4% over the prior four months. Weather likely played a role in the weakness and rebound.  Sales at furniture and home furnishing stores sank 0.7% in March, after rising 0.6%, on average, the prior three months. Replacement demand due to heavy flooding and earlier fires may have buoyed earlier gains. Home sales picked up on lower mortgage rates in the first quarter but remain subdued. That could be a headwind to furniture sales next month.

Gasoline station sales fell 2.5%, pulled lower by a 6.3% drop in average gasoline prices. That translates to a substantial inflation-adjusted gain. 

So-called “core� sales, which exclude eating and drinking places, automobile dealers, gasoline stations and building materials stores rose 0.4%, in line with expectations. That suggests at least a modest gain to real personal consumption expenditures is likely in the first quarter of 2025.

Sales at department stores dropped 0.3% in March, after falling -0.3% on average over the prior three months. Department store sales are down 5.5% over the past 12 months.  Other general merchandise store sales, which includes discounters, rose strongly as households, even those that make over $100,000 per year, gravitate toward value.

Consumer sentiment data through April show a sharp drop across income levels. Financial strain among lower-income consumers has been apparent in recent data but our concerns are that upper-income consumers may be cutting back their spending. The U.S. equity market, a consistent source of wealth for upper income households, remains well off its recent peak. Tariff uncertainty and concern about the outlook for the U.S. economy is weighing on consumers, but not yet sending them into retreat.

Sales at health and personal care stores rose a solid 0.7% in March after a strong gain in February. This category is up 6.4% on the year. It was an unusually bad cold and flu season this year