US: Retail Sales Slide, But They’ll Come Back Stronger

Retail sales fell more than expected in February, but this shouldn't be alarming. January's stimulus-payment-induced surge was revised even higher and with another stimulus cheque hitting bank accounts and the weather situation having improved, the numbers for March and April will surge.

Sales fall, but don't worry

Retail sales fell 3% month-on-month in February, which was weaker than the -0.5% MoM consensus figure, but it is important to point out that the $600 stimulus-payment-induced surge in January retail sales was revised higher to 7.6% from 5.3%. Therefore, looking at the dollar level of sales it is broadly in line with expectations.

February was always going to struggle against that stellar set of figures for January. Incomes obviously dropped back while bad winter weather in many states depressed activity. We had already seen unit auto sales numbers fall 5.8% MoM to an annualised 15.67mn and this translated into a 4.2% drop in the value of auto sales. The only category to see a rise was gasoline station sales, which rose 3.6% on the back of higher prices while food sales were flat. The other categories all fell heftily with department store sales down 8.4%, sporting goods down 7.5% while non-store (internet) fell 5.4%. Surprisingly eating and drinking fell 2.5% despite the broader relaxation of restrictions in many states.

Retail sales levels - February 2020=100

(Click on image to enlarge)

Source: Macrobond, ING

March and April sales will surge

Overall, the report remains consistent with a strong 1Q GDP reading with the level of total sales still 6.3% higher than a year ago – before the pandemic really hit. The “control group” which excludes more volatile components such as food service, autos and building materials, is a better match with broader consumer spending trends and while it dipped 3.5% MoM, this followed an 8.7% jump in January. We know that retail sales in March and April are going to be very strong, boosted by the latest $1,400 stimulus payment while the ongoing relaxation of Covid containment measures across many states will increase the opportunities to spend. More normal weather will also help to reverse some of the February decline.

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Disclaimer: This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does ...

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