Washington (CNN) 鈥� Spending at US retailers rose in March for the second consecutive month, underscoring the strength of the US consumer
Retail sales rose 0.7% in March from the prior month, a slower pace than February鈥檚 upwardly revised 0.9% gain, the Commerce Department reported Monday. That beat the 0.4% increase that economists projected, according to a FactSet poll. The figures are adjusted for seasonal swings but not inflation.
Retail spending has increased in seven of the past 10 months through March.
Sales were up across several categories in March, including at gas stations, which increased a strong 2.1% from February. Gas prices Still, excluding sales at gas stations, retail sales were up 0.6% in March.
Online sales jumped 2.7% in March, while specialty stores saw sales increase a solid 2.1%. Spending at restaurants and bars rose 0.4% last month. Meanwhile, sales of electronics, clothes, and sporting goods fell 1.2%, 1.6% and 1.8%, respectively.
鈥淭oday鈥檚 retail sales figures show strong consumer spending wrapping up the first quarter of 2024,鈥� said Claire Tassin, retail and e-commerce analyst at Morning Consult, in a note Monday. 鈥淚n March, promotional activity from e-commerce brands like Amazon helped to drive up online sales.鈥�
No rush to cut rates
Monday鈥檚 report adds to evidence that the US economy remains solid, keeping the Federal Reserve in wait-and-see mode. A strong economy means the Fed won鈥檛 be in a rush to cut rates, especially considering that there are some signs that inflation鈥檚 progress has stalled in recent months. Fed officials have said they are not yet convinced that inflation is truly headed toward their 2% goal.
鈥淲ith inflation running above target, economic growth continuing to show momentum, and elevated prices across a range of asset markets, the current stance of monetary policy is appropriate,鈥� Kansas City Fed President Jeffrey Schmid said Friday at a conference in Overland Park, Kansas. He does not vote on interest rate decisions this year.
鈥淭herefore, rather than preemptively adjust the policy rate, I would prefer to be patient and wait for clear and convincing evidence that inflation is on track to hit our 2% target before adjusting the stance of policy,鈥� he said.
For now, interest rates are at a 23-year high after the Fed raised rates aggressively starting two years ago. Analysts at major Wall Street banks have recently pushed back their estimates on the timing of the first rate cut. Goldman Sachs is forecasting the first cut to be in July instead of June, while Bank of America now sees the first cut in December instead of June.
Could robust spending persist?
Americans have been on a spending spree these past few years and economists argue that will likely continue this year.
The US economy grew at a brisk pace last year, thanks to strong consumer spending, which accounts for about two-thirds of economic growth. Spending has remained solid, even in the face of still-high inflation and elevated interest rates.
鈥淗ouseholds are just not changing their spending patterns, but they鈥檝e been changing everything else,鈥� Shannon Seery Grein, an economist at Wells Fargo, told CNN previously. 鈥淭here has been this change in psyche in which they change everything to fit their spending patterns. They鈥檙e saving less on a monthly basis, they鈥檙e pulling out money from other assets such as retirement accounts, we鈥檝e seen a pickup in Buy Now Pay Later, we鈥檝e continued to see a pickup in credit card usage and so on.鈥�
鈥淚 think you鈥檙e going to keep seeing households spend at the rates that they have,鈥� she added.
The Commerce Department releases broader figures on consumer spending for March later this month. In February, spending on goods and services advanced 0.8%, the strongest monthly gain in more than a year. Consumer spending hasn鈥檛 contracted since March 2023.
And as long as the job market remains healthy, so will spending. Employers added as the unemployment rate fell to a low 3.8% that month. Annual wage growth, measured as average hourly earnings, slowed last month, but it continued to beat inflation.
The US job market is currently one of the strongest in history: Job growth has expanded for 39 straight months, the fifth-longest streak on record, and the unemployment rate has been below 4% for more than a year.
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