- Retail sales declined by 8.7% m/m in March, just below market expectations for 8% m/m decline. Following the revisions, February’s decline was slightly smaller than originally reported, with sales down 0.4% (versus -0.5%).
- Sales in relatively more volatile categories were weak, affected by store closures and lower prices. In particular, sales at motor vehicles & parts dealers declined by 25.6% and sales at gas stations fell by 17.2% (partially a price story). Food services and drinking places also reported double digit declines, with sales falling by 26.5%. Building materials & garden equipment fared well, rising by 1.3%.
- On the other hand, the story was slightly better for the control group, which excludes autos, building materials, gasoline stations and food services. This category of sales was up 1.7%% in March, ahead of market expectations. Not surprisingly, food and beverage stores saw 25.6% increase in sales. Sales also rose at health & personal care stores (+4.3%) and online (+3.1%). Nearly all other categories declined, clothing stores faring the worst (-50.5%).
Key Implications
- As expected, this was a dire report, showing a historic decline in retail spending amid wide-spread store closures. As a silver lining, core sales, which are used in GDP calculation, rose on the month, buoyed by large gains at essential stores, such as groceries and pharmacies. Online retailers also came out on top, as many households stayed in and shopped online.
- While core sales held up in March, April will likely be far worse as initial stockpiling by households moves into the rear view mirror, businesses shutdowns become widespread and paychecks start to dwindle. For example, after falling by eye-popping 32% m/m in March, vehicle sales could drop by much as 70% m/m in April to just 300k.
- Given the scope of job losses, Congress has moved quickly to provide generous support to households through the CARES act in order to avoid a protracted downturn. The $550 billion in transfers to individuals authorized under the bill will cushion personal income and thus consumer spending. Under the expectation this relief is received in a timely basis during the second quarter, the boost to incomes is substantial – enough to counter the negative impact on disposable personal income from dramatically lower employment and reduced hours.
