Retail sales recover from dismal February
As the main driver of America’s economy, consumer spending remains the crucial link to our post-pandemic economic recovery. In February, the Department of Commerce sent a mild shudder across the retail industry when it reported that retail sales in February suddenly fell by 2.7%, far below January’s massive 7.7% gain.
But on Wednesday, the March Retail Sales report was released, showing consumer spending had sprung back to life. In March, monthly retail sales grew by 9.8%, beating Wall Street’s consensus forecast of a 5.6% increase. Total sales were reported at $619.1 billion — a record high and up 27.2% from March 2020. The report also reconfirmed Wall Street’s initial assessment of February’s sudden collapse in consumer spending. February’s arctic blast of cold and snow had caused millions of homes and businesses across the nation to lose power. In addition, the extreme weather greatly reduced foot traffic at retail stores and lessened demand for nonessential purchases.
Back in March and April of last year, monthly retail sales plummeted by 8.3% and 14.8%, respectively, when the harshest of government restrictions and mandates were first imposed. Fortunately, retail sales numbers quickly recovered to their pre-pandemic levels. In fact, Wednesday’s report marks the 10th consecutive month where retail sales are actually higher than they were before the pandemic hit.
In March, all 13 retail sectors posted a monthly gain in sales. The top performing sector was Sporting Goods, Hobby, Musical Instrument & Book Stores, which reported a 23.5% increase. Also making the Top 5 were Clothing & Clothing Accessories Stores (+18.3%), Motor Vehicle & Parts Dealers (+15.1%), Food Services & Drinking Places (+13.4%) and Building Materials & Garden Equipment & Supplies Dealers (+12.1%).
March’s retail sales data highlights the impact vaccines and a more open economy are having on the American retail industry. For example, Clothing & Clothing Accessories Stores and Food Services & Drinking Places were brutalized by the pandemic. Both represent retail sectors that rely heavily on in-person foot traffic to drive sales. But in March, their respective 18.3% and 13.4% gains vastly outpaced that of Nonstore Retailers, which are primarily online retailers such as Amazon. In March, Nonstore Retailers posted just a 6% monthly gain in sales — ranking 10th out of all 13 retail sectors.
As the data suggests, the offshoot of these vaccines is a gradual return to pre-pandemic spending norms. Consumers are increasingly dining outside their home. In March, sales at Food Services & Drinking Places (bars and restaurants) rose 13.4% while Food & Beverage Stores (grocery and liquor stores) gained just 0.7%.
Despite the tremendous recovery in the retail industry, the gains among the various 13 sectors remain highly uneven. Whereas monthly online shopping sales have soared near 35% since February 2020, the bar and restaurant industries have yet to reach their pre-pandemic level. March’s retail sales data is but a quick snapshot of the current state of the retail industry. But it does provide a reassurance that 2021’s economic recovery remains on track.
Mark M. Grywacheski, Investment Advisor
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Quad Cities Investment Group, LLC is a registered investment advisor with the U.S. Securities Exchange Commission.
