Retail Sales Post Modest Increase

Consumers purchased more cars, dined out and shopped online.

May 17, 2023

ALEXANDRIA, Va.—Retail sales were up a seasonally adjusted 0.4% in April compared to March, reports the Wall Street Journal.

This is the first time in the past three months that retail spending has been up. Auto, dining out and online purchases increased in April, while consumers stopped spending as much on gasoline and big-ticket items such as appliances and furniture.

“Consumer spending is not about to contract and will instead support at least modest continued economic growth,” Andrew Hollenhorst, chief U.S. economist at Citi, told the Journal.

Consumer spending gives a picture of the U.S. economy, and April’s retail sales add to a mixed picture of economic activity in recent months, according to the Journal. The Federal Reserve raised interest rates for the 10th consecutive time earlier this month in an attempt to slow down the economy and mitigate inflation, which is still historically high. The Federal benchmark rate is at a 16-year high.

At the height of the pandemic, consumers were spending large amount on goods, and now they’ve shifted their buying habits to services and travel, like airfare, salon visits and concert tickets, and that may explain the modest spending increase in April.

“These trends make sense because the spending binge on goods during the COVID years had to slow sometime, while we’re still playing catch-up on socializing with family and friends,” Robert Frick, corporate economist at Navy Federal Credit Union, told the Journal.

“We are seeing a more cautious consumer,” said Joanne Crevoiserat, chief executive of Tapestry, during a May 11 call to discuss earnings. Tapestry, which owns the handbag and apparel brands Coach and Kate Spade, expects sales to fall between 4% and 6% in the current quarter. Home Depot said it expects annual sales to decline for the first time in over a decade.

According to Kroger CEO Rodney McMullen, consumers are bargain shopping and purchasing more of the store’s private label line. They’re also grocery shopping more frequently to find the lowest price, and the consumers that are the most price sensitive are shopping at discount or big-box chains over Kroger.

Last week, the U.S. Labor Department reported that inflation slid slightly in April to 4.9% year over year. April’s consumer price index reading was down over March’s 5% reading, and although, inflation has fallen 10 straight months, it remains historically high.