The US retail sales in March rose for the second consecutive month, showcasing the strength of the US consumer driven by a robust job market. Retail sales increased by 0.7% in March, beating economists’ projections of a 0.4% increase. This follows a 0.9% gain in February. Sales have increased in seven of the past 10 months leading up to March. Sales were up in several categories, including gas stations, online sales, specialty stores, and restaurants and bars. However, sales of electronics, clothes, and sporting goods fell in March.
The retail sales figures for March indicate strong consumer spending at the end of the first quarter of 2024. E-commerce brands like Amazon contributed to the increase in online sales through promotional activities. This supports the idea that the US economy remains solid, keeping the Federal Reserve in wait-and-see mode. While inflation has stalled in recent months, the strong economy suggests that the Fed is not in a rush to cut rates. Fed officials have expressed a preference for waiting for clear evidence that inflation is on track to reach their 2% target before adjusting monetary policy.
Interest rates are currently at a 23-year high, with analysts from major Wall Street banks postponing their estimates for the first rate cut. Goldman Sachs and Bank of America have adjusted their forecasts, now expecting the first cut to happen in July or December instead of June. Despite uncertainties in the economic climate, Americans have been consistently spending over the past few years. Economists predict this trend will likely continue in 2024 due to strong consumer spending, which is a significant driver of economic growth.
The US economy saw robust growth last year, fueled by strong consumer spending. Despite high inflation and elevated interest rates, spending has remained solid. The economy’s performance is closely tied to consumer behavior, and households have continued to spend at high rates. The job market plays a crucial role in sustaining consumer spending, with employers adding 303,000 jobs in March. The unemployment rate fell to 3.8%, maintaining its low levels for more than a year. Wage growth, while slowing slightly, still outpaces inflation.
The Commerce Department will release broader figures on consumer spending for March, following the strong performance in February where spending on goods and services increased by 0.8%. Consumer spending has not contracted since March 2023. As long as the job market remains healthy, consumer spending is expected to remain strong. Job growth has been consistent for 39 straight months, with the unemployment rate staying below 4% for over a year. Economists believe that households will continue to spend at high rates, driven by confidence in the job market and the overall economy.
