NEW YORK β U.S. shoppers increased their shopping last month, fueled by a spending spree on big ticket items from gadgets to cars before President Donald Trumpβs expansive new tariffs started kicking in.
Retail sales rose 1.4% in March, after rising 0.2% in February, according to the Commerce Department. Retail sales fell 1.2% in January, hurt in part by cold weather that kept more Americans indoors, denting sales at car dealers and most other stores.
Excluding sales at dealers of autos and parts, sales only rose 0.5%.
Sales at dealers of autos and parts rose 5.3%, while electronics retailers had a 0.8% increase. Sporting goods retailers enjoyed a 2.4% gain. Grocery stores saw a 0.1% increase and clothing and accessories stores had a 0.4% increase. Online retailers posted a 0.1% gain and restaurants had a 1.8% increase. However, furniture and home furnishings stores posted a 0.7% decline.
βThese are simply blow out numbers on March retail sales where the rush is on like this is one gigantic clearance sale,β said Christopher S. Rupkey, chief economist at FWDBonds LLC in a published note. βConsumers are expecting sharply higher prices the next year and are clearing the store shelves and picking up bargains while they can. β
Analysts expect that sales will start falling off as the slew of tariffs increase costs for companies and many retailers are forced to raise prices, hurting shopper demand. Consumersβ confidence has already taken a hit. And a growing number of retailers and suppliers are halting shipments from China as well as pausing orders as they wait to see where the tariffs settle. In some cases, they are canceling orders.
The result of the trade wars so far: a baseline tariff on most countries of 10%, with imports from China getting taxed at a combined 145%. Goods from Canada and Mexico face tariffs of up to 25%, while imported autos, steel and aluminum are taxed at that same rate. China retaliated last week with a 125% tariff on U.S. goods.
Early this month, Trump announced sweeping and steep tariffs on nearly all trading partners. But after Trumpβs U- turn last week that paused the new tariffs on about 60 nations for 90 days, average U.S. duties remain much higher than a couple of months ago.
Last Friday, the Trump administration announced tariff exemptions on electronics like smartphones and laptops but a few days later said theyβre only a temporary reprieve.
Amid lots of uncertainty, U.S. consumer sentiment plunged in April, the fourth consecutive month of drops, in a seemingly sharp disapproval of Trumpβs trade wars that have fueled anxiety over possible job cuts and rising inflation.
The preliminary reading of the University of Michiganβs closely watched consumer sentiment index, released Friday, fell 11% on a monthly basis to 50.8, the lowest since the depths of the COVID-19 pandemic. Over the past year, confidence has dropped 34%.
Analysts say that the big retailers will be able to navigate better than the smaller ones which donβt have the clout to absorb extra costs or pressure their suppliers. But it also depends on the type of goods they sell, particularly if they have goods sources from overseas.
Ashley Hetrick, principal and sourcing and supply chain segment leader at accounting firm BDO, noted that stores are taking a βwait and seeβ approach when it comes to ordering goods and are more cautious about ordering seasonal items because they have a shorter shelf life. She said that the cancelling of orders hasn't been widespread.
Walmart executives offered a dose of confidence last week that the retailer will keep delivering low prices as it navigates Trumpβs escalating trade wars with China.
But the nationβs largest retailer, whose competitive prices became a strong magnet for inflation-weary shoppers, told analysts that itβs still vulnerable to the challenges and is monitoring the fluid tariff situation. The company told analysts that sales have been volatile.
βWhile in the short term, weβre not immune to the effects, we are positioned to play offense,β Walmartβs CEO Doug McMillon said at an investor meeting. βNothing about the current environment impacts our confidence in our business or our strategy.β
Amazonβs CEO Andy Jassy said last week that the company has been doing everything it can to keep prices low for customers, including bringing in goods early ahead of the barrage of tariffs and negotiating with suppliers.
But Jassy told CNBCβs Andrew Sorkin Thursday that its network of third-party sellers will have to pass on the higher costs to sellers.
βDepending on which country youβre in, you donβt have 50% extra margin that you can play with, so I think that theyβll try and pass the cost on,β Jassy said.
Jassy said that he hadn't seen a notable change in consumer behavior since Trumpβs sweeping tariffs. And while he sees that some shoppers are stocking up ahead of price increases, the data is limited and he was not sure how broad-based that behavior is.
But according to Bloomreach, which tracks sales from more than 1,000 global brands and retailers overall, North American e-commerce revenue marginally increased 0.4% during the week of March 31 compared with the first week of March. But sales increased 6% between the week of March 24 and the week of March 31.
Online sales in apparel increased 44.8% during the week of March 31 compared with the first week of March, according to Bloomreach.
