By Kate Davidson And Eric Morath
U.S. consumers boosted their spending in March but showed signs
of continued caution despite months of cheaper gasoline and rising
confidence.
Sales at retailers and restaurants increased 0.9% last month to
a seasonally adjusted $441.4 billion, the Commerce Department said
Tuesday. That was the biggest monthly gain in a year, but it was
still down from November, when retail sales reached their highest
level since the end of the recession.
Economists surveyed by The Wall Street Journal had expected
total sales would jump 1.1% in March to offset three months of
declines. The disappointing performance underscored the economy's
difficulty in accelerating almost six years into the expansion.
"This outcome confounds all the standard consumer-spending
models," said J.P. Morgan Chase chief U.S. economist Michael
Feroli. "Job gains, wealth gains, low gas prices and very high
consumer sentiment would all point to solid consumer spending
increases."
Retail-sales data can be volatile from month to month. Spending
surged last fall before slowing during harsh winter weather in much
of the country. The dip was reminiscent of a slowdown during the
first quarter of 2014, when below-normal temperatures and severe
weather kept shoppers away from stores.
A March thaw was expected to drive a bigger rebound in consumer
spending last month. "Instead, consumers' high level of confidence
seems only to be matched by their conservatism," Mr. Feroli
said.
Compared with a year earlier, overall retail sales were up 1.3%
in March. In March 2014, the year-over-year increase was 4.5%.
The latest report follows a string of weak economic data that
has led many economists to dial back estimates for first-quarter
economic growth.
J.P. Morgan economists put their estimate at 0.6% while Morgan
Stanley sees first-quarter growth at 0.9%. The Federal Reserve Bank
of Atlanta on Tuesday put its first-quarter growth estimate at an
annualized 0.2%.
Job growth eased in March following the strongest 12-month
stretch of job creation since 1995. That added to concerns about
consumers' ability to spend.
"There's a lot of signs that would point to a healthier
economy," Nordstrom Inc. Chief Financial Officer Michael Koppel
told investors last month. Those include steady hiring, lower
gasoline prices and a strong stock market. But "it's not like we've
seen that breakout performance" for discretionary spending.
Despite the overall sales increase in March, economists said the
details within Tuesday's report were disappointing.
The higher sales were largely driven by car purchases, which
rose 2.7% last month. But weak sales at gas stations continued to
hold back overall growth, despite an uptick in oil prices in March.
When excluding both gasoline and autos, sales rose 0.5% last
month.
A surge in spending at home-improvement stores, including
building supplies and garden-equipment retailers, also helped boost
sales in March.
"The East Coast really had a hard winter, and we supply a lot of
the goods that help people with that, and that helped us," Ace
Hardware Chief Executive John Venhuizen said in an interview.
"We're fortunate that a lot of our business at Ace...is not as much
driven by desires and discretionary spending as it is by
needs."
Americans also spent more on furniture, clothing and accessories
in March. They trimmed spending on electronics and appliances,
online shopping, and groceries and beer.
The retail-sales data are adjusted for seasonal variations but
not for price changes. The report doesn't include estimates for
most services, which make up the bulk of consumer spending.
Paying less at the pump should free up money for U.S. consumers
to spend elsewhere. But many are socking that money away, or using
it to pay down debt.
The personal saving rate climbed to 5.8% in February, its
highest level since the end of 2012, the Commerce Department said
last month.
Americans also pared down their credit-card balances in
February, posting the largest percentage decline in nearly four
years, according to the Federal Reserve.
Still, some economists and merchants expect sales will continue
to rebound in coming months.
Lisa Kornstein, founder of the Scout & Molly's boutique
clothing stores, said sales slowed in February when winter weather
hit. But warmer temperatures and lower gas prices recently have led
to a steady stream of shoppers at the Raleigh, N.C., location she
operates.
"The door is propped open and we've had a consistent stream of
traffic all day," she said last week. "The economy is doing
better...and I think people had a little bit of cabin fever."
Sales at her stores are up between 7% and 10% from a year
earlier, she said.
In a speech last month, Fed Chairwoman Janet Yellen said she
expected a rebound despite disappointing retail sales data in the
early months of 2015.
"I think consumer spending is likely to expand at a good clip
this year given such robust fundamentals as strong employment
gains, boosts to real incomes from lower energy prices, continued
increases in household wealth and a relatively high level of
consumer confidence."The Fed is watching the data as it weighs
whether the economy is strong enough to withstand an increase in
interest rates.
"For a Fed that is supposedly focused on the data, we suspect
the retail sales report is another factor tilting the deck toward a
September liftoff rather than June," said John Ryding and Conrad
DeQuadros, economists at RDQ Economics.
Write to Kate Davidson at kate.davidson@wsj.com and Eric Morath
at eric.morath@wsj.com
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