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April 16, 2018 Blog 1 min read

Retailers bounce back on strong March auto sales.

Chart showing March Retail Sales - percent of change YoY 

Retail sales bounced back in March, rising by a surprisingly strong 0.6%, besting expectations.  Such a solid gain also provides some reassurance after February sales declined fractionally from January levels.

 

Exceptionally strong auto sales provided a significant boost to the monthly result; motor vehicle sales rose by 2.0%, also reversing recent weakness in car sales. Excluding auto sales, core sales were up by a more pedestrian 0.2%, consistent with the February gain.

 

Unsurprisingly, the nonstore retail channel (which most notably includes online retailers), continues to grow at an impressive clip. In March, sales rose by 0.8%, and the year-over-year gain of 9.7% easily outpaces any other broad retail segment.

 

Retailers continue to be impacted to varying degrees by the changing nature of consumer spending, and the sector remains in a transformative phase.  Many brick-and-mortar retailers are in an increasingly challenging environment, as consumers look to internet retailers to an increasing degree.

 

More broadly, the overall backdrop of optimistic consumers supported by strong job market conditions persists, despite some moderation in the past month.

 

Though the unemployment rate held steady at 4.1% in March for the sixth month in a row, job creation was surprisingly weak as employers added just 103,000 jobs in March. Still, the 3- and 6-month averages remain above 200,000, pointing to a jobs market that remains on strong footing. Notably, wages rose again to 2.7% year-over-year and, importantly, any subsequent acceleration in wages should be supportive of continued consumption.

 

With the effects of the recent tax reform still being absorbed, higher take-home pay should provide some boost to consumer spending, although it’s hard to peg how significant that could be. The benefit itself will vary across households, and each will decide how to use that additional cash.

 

The bottom line is largely unchanged. The strength of a still very optimistic consumer sector, fueled by the potential of stronger wage gains and a moderate reduction in their tax bills, should be well positioned to ratchet up their spending. The broad retail sector, to varying degrees, should benefit.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

 

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Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.