Should a rise in retail sales impress us if food and gasoline caused the increase? In March, total sales for retail and food services crept up by 0.4% to $389.3 billion, according to the Census Bureau. That's another new all-time high for this sales metric. But it's a little hard to assert that Americans are confidently spending more money, since without food and gasoline, sales would have been about flat.
Let's start with the historical chart for total sales for retail and food services:
This chart shows pretty clearly that sales have moved steadily upward since last summer. You can also see that the metric has broken new highs for the past three months.
But if you take food and gasoline out of the equation, then the chart looks slightly different:
It looks largely the same until you get to the very end -- the change from February to March. If you subtract gasoline, food, and restaurants from the total, then the same measure was actually $42 million lower in March than in February.
This matters because this data does not take inflation into account. Since food and energy have experienced steeply increasing prices over the past few months, it isn't easy to determine whether physical sales of these goods increased, or if the higher prices were mostly responsible for the apparent rise in sales. So taking these out of the equation provides a clearer estimate of how much spending has actually increased through the will of consumers to buy more stuff.
It also helps to break down the sales numbers by segment:
From this, you can see pretty clearly that sales of most goods and services actually did grow, with the exceptions of autos and miscellaneous retail. Autos, in particular, saw a huge drop in March of $1.2 billion. This might seem surprising, since automakers reported pretty strong sales for last month. In fact, sales actually did rise for autos, but seasonal trends indicate that a bigger increase should have occurred, which translates into a decline for the seasonally adjusted sales total. Weaker auto sales could indicate that rising gas prices persuaded Americans to buy fewer cars than usual in March.
There are a few categories with particularly noteworthy increases, however. Two of the biggest jumps came from furniture and building and garden materials. These businesses have been doing particularly poorly over the past few years as the housing market has struggled. If few people are buying homes, then they usually purchase less furniture and building and gardening materials. Sales growth for these items could indicate some modest improvement in the housing market. Remember, the onset of spring shouldn't have much to do with it, because the Census Bureau adjusts all these numbers for seasonality already.
Despite most sales categories increasing a bit in March, it's pretty hard to get excited about the overall numbers. Gasoline and food clearly drove the 0.4% growth, as sales would have been completely flat month-over-month if you take those components out of the equation.
There are two potential explanations for this result. Rising prices may may have forced Americans to devote more of their money to gasoline and food in March, leaving little left over for additional retail spending. Alternatively, consumer sentiment's decline, caused in large part by rising food and gas prices, has led to Americans curbing their spending. Either way, it looks like the recovery will slow this spring.