March 16, 2021 | 09:14
U.S. Retail Sales (Feb.) — Road Bump On The Speedway
U.S. retail sales fell more than expected in February, but considering the big upward revision to an already boffo gain in January and the awful weather conditions and Texas' power outages last month, the miss is merely a temporary and relatively moderate payback from a great start to the year. Moreover, sales are poised to soar again in March due to the latest (and greatest) round of rebate cheques. In all, the report actually suggests upside risk to our already strong calls for 6.2% annualized growth in consumer spending and 5% for GDP in Q1.
Retail sales fell 3.0% in February, but the bigger news is that the prior month's surge was revised even higher to 7.6% (from 5.3% previously), leaving the yearly level up 6.3%. The control measure (ex-autos, gas stations and building materials) that feeds into personal spending fell 3.5% after an upwardly-revised 8.7% spurt in January (from 6.0% previously)--that's a hefy 2.7 ppts upward adjustment in growth. And, given the huge spike in sales expected in March, real consumer spending could easily top 6% annualized in Q1, and we could even see a double-digit gain in Q2.
The drop in February sales reflected a partial payback in most areas from January's big spike, including in autos, furnishings, clothing, building materials, and food services (which are still down 17% y/y despite easing restrictions). Even non-store sales and sporting goods/books/hobbies retreated, though they are still up 26% and 15% y/y. The main offset came from higher gasoline prices pumping service station receipts.
With restrictions easing, confidence rising amid the quickening vaccine rollout, employment growing, pent-up demand for services, massive untapped household savings, and new, bigger rebate cheques in the mail, consumers are in the drivers seat, set to propel economic growth to its best year in nearly four decades.