U.S. Retail Sales Fall for Second Straight Month--Update
By Eric Morath
WASHINGTON -- U.S. retail sales fell for the second straight month in March, a sign economic growth eased to start the year despite strong consumer optimism and steady hiring.
Sales at U.S. stores, restaurants and online retailers decreased in March 0.2% from the prior month, the Commerce Department said Friday. February sales were revised down to a 0.3% decrease from an initial estimate of a 0.1% gain. Those were the weakest consecutive declines for retail spending since the first two months of 2015.
"The market in the U.S. in particular continues to be challenged," Jerry Storch, the chief executive of Saks Fifth Avenue and Lord & Taylor parent Hudson's Bay Co., told investors earlier this month. "We're planning as if the environment is not going to improve." The high-end retailer is looking to reduce costs in anticipation of weaker-than-expected sales.
Uneven retail spending stands in contrast to soaring measures of consumer confidence, steady hiring early this year, and improvements in the stock market -- though financial-market gains have plateaued since early March. The University of Michigan's consumer sentiment measure, released Thursday, is near the highest level in more than a decade, and the index's measure of current conditions in early April touched the highest mark since 2000.
The retail "data are impossible to square with the stratospheric levels of consumer confidence recorded across an array of surveys," said Ian Shepherdson, chief economist at Pantheon Macroeconomics That suggests either that "spending will accelerate markedly...or confidence will decline."
Decreased spending at auto dealerships and gasoline stations were the primary drivers of the recent decline in overall outlays at retailers. Excluding both autos and gasoline, sales were up 0.1% last month. Underlying modest growth suggests consumers aren't fully retreating, and strong optimism could lead to better spring spending.
Still, after solid spending growth late last year, cooling retail sales the past two months suggests consumers were unable to drive better economic growth to start 2017. Many economists project the pace of growth in the first quarter slowed from the 2.1% rate recorded for the final three months of 2016. The Federal Reserve Bank of Atlanta projected a 0.6% growth rate for the first quarter last week. Updated projections are expected Friday. The Commerce Department's initial reading on first-quarter output will be released later this month.
Retail sales are an important measure of consumer spending, which accounts for more than two-thirds of economic activity in the U.S. But the retail figure doesn't include spending on most services, including rent and medical bills, and the data isn't adjusted for inflation.
From a year earlier, retail sales rose 5.2% in March. Annual gains have slowed since January, but remain at a healthy level that well outpaces consumer inflation.
The latest retail figures also underscore consumers' ongoing shift to e-commerce platforms from traditional brick-and-mortar retailers. Department-store sales rose 0.2% on the month, but were down 4.5% from a year earlier. Nonstore retailers, a category that includes online shopping at outlets such as Amazon, posted a 0.6% gain from the prior month and a 11.9% increase from a year earlier.
At least a dozen major retail chains filed for chapter 11 bankruptcy protection this year. That includes clothing seller Limited Stores LLC, which announced it would close all 250 of its stores, and Payless ShoeSource Inc., which is closing 400 stores in an effort to reorganize around smaller operations.
Among younger consumers "the propensity to buy online shoots up and the willingness to go to brick-and-mortar stores starts declining," Wayfair Inc. Chief Executive Niraj Shah told investors last month. The online seller of home furnishings expects continued sales growth as more millennials get married and buy homes. "You're talking about folks who grew up with digital technology, who've effectively been buying that way their whole adult life," he said.
Friday's report showed auto and parts sales fell 1.2% in March from the prior month. U.S. car and light-truck sales hit a record high in 2016, but sales appear to have leveled off. Auto makers reported that auto sales, measured in units sold, fell in March from a year earlier. Spending at gasoline stations was down 1% in March from February but up 14.3% from a year earlier, reflecting price changes.
Sales at building-supply stores, and sporting-goods and book stores fell last month, but spending rose at clothing and grocery stores. Sales at restaurants and bars fell 0.6% in March.
Write to Eric Morath at email@example.com
(END) Dow Jones Newswires
April 14, 2017 11:19 ET (15:19 GMT)Copyright (c) 2017 Dow Jones & Company, Inc.