U.S. Retail Sales (March 2025)

Retail sales surged in March as consumers stocked up ahead of tariffs   

• Retail and food services sales jumped 1.4% month-on-month (m/m), in line with market expectations.  
• Sales of vehicles and parts played a big role in driving last month's gain, surging by 5.3% m/m as consumers rushed to purchase new cars ahead of the auto tariffs. Building materials and equipment stores' also posted a large increase, rising by 3.3% m/m – the largest monthly gain since March 2021. Meanwhile, sales at gasoline stations declined by 2.5% m/m, weighed down by lower gas prices.
• Sales in the "control group", which excludes volatile components above (i.e., gasoline, autos and building supplies) also rose in-line with expectations, increasing by 0.4% on the month.
• Sales increased across most of the remaining categories. The largest gains were in sporting goods & hobby stores (+2.4% m/m), electronics & appliance stores (+0.8% m/m), and health & personal care stores (+0.7% m/m). Furniture and home furnishings stores were the only category to post a decline. Online sales were little changed (+0.1%), but that came after a surge of 3.5% m/m in February.
• Spending at bars and restaurants also rebounded last month (+1.8%), following an uneven performance in the last three months.

Key Implications

• There were no major surprises in today’s report. The sharp increase in retail sales was widely anticipated, given the surge in vehicle purchases that had already been signaled earlier this month. However, cars were not the only thing selling like hot cakes in March, with consumers were stocking up on a range of goods ahead of the reciprocal tariff announcement set for April 2nd. Even sales at bars and restaurants saw an improvement last month following unsteady performance in the prior three months, with eating out perhaps complementing the shopping experience. While some of this behavior may carry over into April, it’s likely to mark a final burst of spending before consumers begin tightening their purse strings. 
• Consumer sentiment indicators suggest growing concern. Confidence has dropped sharply, with households increasingly worried about inflation and job security. Household wealth has also taken a hit, as the financial market selloff has eroded savings and reduced the safety cushion. Prices are expected to rise further, with inflation likely to accelerate as early as Q2. At the same time, economic growth is expected to stall through the first half of the year, accompanied by a rising unemployment rate. Today's retail reading suggests consumer spending is likely to expand by just 1% (annualized) in Q1 – a sharp slowdown from Q4-2024's 4.0% – with a further softening in Q2 spending looking increasingly likely.

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