Retail industry sees lesser consumer spending compared to February

Consumers continue to spend at a slow rate this month than projected in February, according to a Wednesday report by the Commerce Department.

Advance retail sales rose 0.3 percent for the month, significantly less than the 0.4 percent predicted by the Dow Jones. Sales were up 0.2 percent after excluding vehicles, considerably behind estimates for a 0.9 percent gain and indicating that after a fast start to the year, shoppers were cooling down.

According to Labor Department figures released last week, spending was much behind the growth in prices, which jumped 0.8 percent in February. Inflation is not factored into retail expenditure figures.

The biggest hit to February's figures came from online sales, with non-store sales falling 3.7 percent. Data revealed on Wednesday was that January expenditure was raised up to a 4.9 percent growth, a blistering rate that was even faster than the earlier estimate of 3.8 percent.

The two-month figures show that “real consumption growth remains reasonably solid,” said Andrew Hunter, senior U.S. economist at Capital Economics.

“With real disposable incomes having already been falling since mid-2021, as earlier fiscal support was withdrawn, and the more general surge in prices took its toll, real consumption growth still looks likely to slow over the coming months, particularly when the personal savings rate is already below its pre-pandemic level,” Hunter wrote. “It also may not be long before Fed tightening starts to hit spending on big-ticket durables.”

Consumers, on the other hand, remain cash strapped, ending 2021 with $1.4 trillion in savings, despite the fact that the private savings rate, most recently at 6.4 percent, has been steadily declining during the pandemic era.

Demand for goods has been extraordinarily high, and supply has tried to keep pace. This has fueled inflation, which is now running at a 12-month rate of 7.9 percent, the fastest in more than forty years.

Retail spending increased 17.6 percent year on year, according to the Commerce Department.