U.S. retail sales increased solidly in March, boosted by record- high gasoline prices, but consumers are starting to feel the pinch of high inflation, with online spending posting back-to-back declines for the first time in more than a year.
The report from the Commerce Department on Thursday, which also showed stronger retail sales growth in February than initially thought, suggested consumer spending picked up in the first quarter, helping to underpin the overall economy.
Retail sales, which are mostly goods, advanced 6.9% on a year-on-year basis. They are not adjusted for inflation.Sales at service stations shot up 8.9%, accounting for the bulk of the increase in sales in March. Monthly consumer prices increased by the most in 16-1/2 years in March as Russia's war against Ukraine boosted the cost of U.S. gasoline to record highs. Prices at the pump on average soared to an all-time high of $4.33 per gallon in March, according to AAA.
Sales at sporting goods, hobby, musical instrument and book stores rose 3.3%. Receipts at bars and restaurants, the only services category in the retail sales report, rose 1.0%. Demand for services like air travel and hotel accommodation is surging, providing further support for consumer spending. This follows the rolling back of pandemic restrictions.
"If previous environments are any indication, the latter half of 2022 could see a slowdown in consumer demand as the Fed tries to contain elevated price levels," said Peter Essele, head of portfolio management at Commonwealth Financial Network.
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