United States: Retail sales plunge at sharpest rate on record in March
Nominal retail sales declined at the sharpest rate in the series’ near three-decade history in March, falling 8.7% in month-on-month seasonally-adjusted terms. The result was markedly down from February’s revised 0.4% dip in sales (previously reported: -0.5% month-on-month) and underwhelmed market expectations of a 7.3% drop. Retail sales excluding cars, gasoline, building materials and food services—also known as core retail sales—rose 1.7% in March, contrasting February’s 0.2% decline.
The historic decline in retail sales came as large sections of the country were shut down to curtail the domestic spread of the Covid-19 pandemic. Retail sales of clothing and accessories plummeted a startling 50.5% month-on-month in March. Moreover, closures of bars and restaurants hammered sales at food services and drinking places, while containment measures in some states and social distancing caused sales of discretionary goods such as vehicles, sporting goods and electronics to plunge in the month. Conversely, sales at grocery stores skyrocketed as households prepared for lockdown, while sales at non-store retailers, which includes online shopping, strengthened from February, with online retailers such as Amazon providing a substitute shopping experience for consumers.
In annual terms, retail sales declined 6.2% in March, contrasting February’s 4.6% increase. Meanwhile, the annual average variation in retail sales growth fell to 3.1% from 4.0%.
The impact on consumer spending from the coronavirus crisis will be two-fold moving forward. First, closed retailers and social distancing is staving off shopping. Second, mass layoffs resulting from halted activity will also restrain private consumption. March’s historic decline is likely not the last severe drop in retail sales as many parts of the country did not restrict non-essential activity until late March or early April. Consequently, consumer spending is projected to be severely impaired in the remainder of the first half of the year.