U.S. retail sales increased by 0.5% in March

KPMG Senior Economist Ken Kim gives his three takeaways from the March retail sales report.

Kenneth Kim

Kenneth Kim

Senior Economist, KPMG US

+1 212-954-6144

Video transcript

KPMG Senior Economist Ken Kim gives his three takeaways from the March retail sales report.


Soaring inflation lifts March retail sales

Consumer resilience was the story in March, as the U.S. Commerce Department reported retail sales growth of 0.5% month-over-month in the face of rising inflation. The move marked a deceleration from the previous two months, which were revised upward by several tenths of one percent, yet came in close to market expectations of a 0.6% gain. March was the third consecutive month in which U.S. retail spending climbed.

Gas prices propel retail uptick while automotive sales tumble

Gasoline station sales recorded the largest increase among all categories in March, rising 8.9% over February. Western sanctions on Russia’s energy exports following its invasion of Ukraine have sent gas costs to record levels, causing consumers to spend more at the pump.

The slowing auto sector was a dim mark on the March retail sales report. Spending on motor vehicles and parts fell by 1.9% as the semiconductor chip shortage continued to suppress new vehicles. According to the Bureau of Economic Analysis, auto dealer lots held just 14 days supply of inventory as of February, compared to the usual 60.

Shoppers keep opening their wallets

Despite worsening inflationary pressure, sales in other retail categories also increased, a sign of consumer confidence. General merchandise store sales, clothing, electronics, and sporting goods were up 3% to 5% for the month. Spending in restaurants and bars increased 1% as consumers reengaged in social activities. And while online sales fell 6.4%, some giveback was expected after the 21% jump seen in January.

Growth expected as quarter closes

The U.S. consumer is showing resiliency in the face of higher inflation as the first quarter draws to a close from an economic data perspective.  When GDP data is released later this month, we forecast first quarter GDP to come in at a 1.2% seasonally adjusted annualized growth rate. While this would be a sharp step down from 6.9% growth reported in Q4 2021, we are optimistic on growth the rest of the year. We believe 2022 GDP growth could come in close to 3%, still a solid and respectable figure after a somewhat tumultuous beginning.