Retail sales increased sharply in March, rising 1.1%, the best monthly gain in well over a year. The news brings another clue for thinking that the recent economic slowdown was a temporary affair related to the weather. Indeed, today’s report also revived the year-over-year trend in retail spending. For the moment, March is shaping up as a positive turning point of significance for the big-picture state of US macro.
As the first chart shows, the winter blues are fading fast as it relates to consumer spending. In fact, the numbers look even more impressive when we strip out gasoline sales, the pernicious slice of retail that’s typically unproductive as it relates to economic growth.
More importantly, retail spending has reversed course in a meaningful way on a year-over-year basis. Sales advanced 3.8% for the year through March. That’s a dramatic improvement over February’s meager 1.8% gain. As such, retail spending is now climbing at the highest pace since last November.
Today’s report follows earlier signs that the economic profile for March is reviving. It’s too early to say if we’re on the cusp of a substantial acceleration in growth vs. a return to the moderate expansion rate that prevailed before the economy suffered a winter chill. What we do know is that business cycle risk remains muted. I say “remains” because the economic trend overall has been encouraging in recent history (see here and here, for instance) in spite of what a handful of numbers implied.
The bottom line: Today’s report on retail spending adds another data point to the generally upbeat news for March’s economic profile to date.