By ANNE D’INNOCENZIO, Associated Press
NEW YORK (AP) — Retail sales rose modestly in March, but higher prices for food, gasoline and other essentials took a big chunk out of consumers’ wallets.
Retail sales rose 0.5% after posting a revised 0.8% rise from January to February, the US Commerce Department reported on Thursday. Spending has been buoyed by wage gains, strong hiring and more money in bank accounts. January’s increase of 4.9% was the biggest jump in spending since March 2021, when American households received a final $1,400 federal stimulus check. But skyrocketing prices on everything, particularly at the gas station, are now making shoppers more choice about how to spend their money.
Excluding an 8.9% increase at gas stations, total retail sales fell 0.3% last month.
Business at general merchandise stores increased 5.4%, while sales at clothing stores rose 2.6%. The restaurant had a 1% increase. But online sales fell 6.4% and sales in motor vehicles and parts fell 1%.
“They are spending selectively this month, and the Russo-Ukrainian war gasoline price spike was where most of the spending was done,” said Christopher S. Rupkey, chief economist at research firm FWDBONDS LLC.
Neil Saunders, managing director of GlobalData Retail, agreed.
“There is mounting evidence that households are now becoming more nervous about inflation and this, in turn, is undermining their confidence,” he said.
Saunders pointed out that areas like autos, which sell higher-value items, saw sales drop. He said it could be that shoppers are turning away expensive purchases as they try to balance their budgets. He also believes that online purchases have decreased because that expense is more discretionary and easy to cut. He also believes the pushback online could be a consequence of shoppers pricing in higher shipping costs.
The retail report covers only about a third of total consumer spending and does not include services such as haircuts, hotel stays and airline tickets, areas that have recovered.
Retailers are closely watching Russia’s war with Ukraine and how it could affect shoppers’ confidence, but also worsen inflation. The conflict has already limited supplies of wheat, vegetable oils and electronic components such as chips. It pushed up already-high fertilizer prices, made scarce supplies even harder to find, and squeezed farmers, especially those in the developing world. In addition to the Russian invasion, rising COVID-19 cases and renewed restrictions in China could worsen supply chain problems.
The Labor Department said Tuesday that its consumer price index rose 8.5% in March from 12 months earlier, the steepest year-on-year increase since 1981. Prices have risen due to supply chains with choke points. bottle, strong consumer demand and disruptions to global food and beverage supplies. energy markets worsened by the war. From February to March, inflation rose 1.2%, the biggest monthly jump since 2005. Gasoline prices drove more than half of that increase.
According to AAA, the average price of a gallon of gasoline ($4.07) is up 42% from a year ago, though it has dropped in the past two weeks.
The March inflation figures were the first to fully capture the rise in gasoline prices that followed the Russian invasion of Ukraine on February 24. Moscow’s attacks have triggered far-reaching Western sanctions against the Russian economy.
The acceleration of inflation is happening in a strong economy. In March, employers added a solid 431,000 jobs, the 11th consecutive month in which they added at least 400,000. By 2021, they added 6.7 million jobs, the most on record in any year. In addition, job openings are near record levels, layoffs are at their lowest point since 1968, and the unemployment rate is just above a half-century low.
Retailers have been forced to keep raising hourly wages for front-line workers to stay competitive, but now they worry that any progress they’ve made will be undone because higher prices are taking a toll on workers’ spending power.
To hedge against any drop in consumer spending, retailers are cutting back on spending while taking a measured approach to ordering merchandise and adding markups.
Amazon announced Wednesday that it will add a 5% “fuel and inflation surcharge” to the fees it charges third-party sellers who use the e-commerce giant’s fulfillment services. The Seattle-based company said on its website that the additional fees, which take effect April 28, are “subject to change” and will apply to both apparel and non-apparel items.
Gary Friedman, CEO of luxury furniture chain RH, formerly known as Restoration Hardware, told analysts in late March that the company has seen consumer demand weaken in the company’s first quarter, which began to end of January, which coincided with Russia’s war with Ukraine.
“I don’t think anyone really understands how high prices are going to be everywhere, in restaurants, in cars, in everything,” Friedman said. flexible. You have to be able to improvise, adapt, overcome and be ready for anything.”
AP economics writer Paul Wiseman in Washington contributed to this report.
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