Retail v. Raging Inflation, Stimulus Miracle March and the red-hot shift to services

It’s harsh out there in several ways.

By Wolf Richter for WOLF STREET.

Retail sales, published by the trade department today, are only sales of goods, not services. But the services account for almost two-thirds of what consumers spend their money on and include rent, airline tickets, hotel reservations, streaming services, insurance, concert tickets and the like. There has been an increase in consumer spending on services in recent months as consumers return to pre-pandemic consumption patterns and shift their spending back to services that had collapsed. Expenditure on services had risen by 12.4% from a year earlier in February, slightly exceeding inflation. So this shift to services from goods – that is, from retail – has taken place.

Retail sales in March increased by 0.5% from February, seasonally adjustedand by 16.8% not seasonally adjustedto $ 677 billion, a 7.0% increase from Stimulus Miracle March last year, when stimulus checks were used, sending retail sales staggering.

Stimulus Miracle March 2021 was a very difficult month to beat. But the Americans blew off it. What they did not do was blow off the now raging inflation.

Furious inflation in retail.

Inflation in retail sales means inflation in durable goods such as cars, furniture, electronics and tools; and in non-durable goods such as food, household items and gasoline.

Commodity inflation cooled slightly in March due to a sharp fall in used car prices following gigantic increases, and the CPI for durable goods fell 0.9% in March from February. But it still increased by 17.4% year-on-year (red in the chart below). Prices of non-durable goods rose by 3.8% in March from February and by 13.1% year-on-year (purple).

So retail sales rose 0.5% in March. Prices of durable goods fell 0.9%, accounting for the majority of retail sales. But prices of non-durable goods rose by 3.8%. And the result for retail sales in March, after inflation, is “mixed”.

On an annual basis, there is nothing mixed about this, with inflation for durable goods rising 17.4% and inflation for non-durable goods up 13.1% compared to the increase of 7.0% in retail sales.

Sales at dealers of new and used vehicles and spare parts, the largest retailer category fell 1.9% in March from February seasonally adjusted (red line), to put a stop to the prices of new vehicles and falling prices of used vehicles. But not seasonally adjustedsales rose to $ 145 billion, almost matching the all-time record in March 2021, which had been the last month before car dealers began to run out of inventory (purple line).

The year-on-year adjustment of the record was achieved by huge year-on-year price increases, which offset the 15% drop in the number of used vehicles sold and the 25.9% drop in the number of new vehicles sold.

Sales at e-commerce and other “non-stores” the second largest category fell 6.4% seasonally adjusted in March from February, the second month in a row with declines, to $ 90 billion, rising only 1.8% year-on-year compared to the Stimulus Miracle March:

Food and Beverage Stores: Sales increased 1.0% for the month, seasonally adjusted, to $ 79 billion and increased by 8.4% year-on-year, driven by price increases:

Food service and drinking places: Sales increased 1.0% for the month seasonally adjusted to a record high of $ 75 billion and by 19.4% year-on-year. It is over two and a half times CPI inflation for food away from home (6.9%):

General department stores: Sales rose 6.6% for the month to a record high of $ 62 billion, seasonally adjusted, up 4.8% from the Stimulus Miracle in March 2021. Walmart and Costco are in this category, but not department stores.

gas stations, oh, no surprises here: Sales rose 8.9% for the month to a record $ 64 billion, seasonally adjusted, and by 37% year-on-year, driven solely by the rise in gasoline prices.

Building materials, garden supplies and equipment stores: Sales rose 0.5% for the month to a record $ 43.6 billion, giving a year-on-year gain of 0.6% from the Stimulus Miracle March:

Clothing and accessories stores: Sales increased by 2.6% for the month and by 7.3% year-on-year to $ 27 billion, seasonally adjusted:

Various retailers (including cannabis stores): Sales rose 0.8% for the month to a record $ 15.6 billion (seasonally adjusted), up 13% from a year ago. This category tracks specialty stores, including cannabis stores, beer brewing items, telescopes, art supplies, etc.

Department stores: sales fell 0.3% for the month to $ 12 billion, but rose 7.4% from the Stimulus Miracle March. Compared to the peak in the year 2000, sales fell by 39% as Americans have left that type of retailer, which has triggered the closure of thousands of stores and several bankruptcies:

Furniture and home furnishings stores: Sales increased 0.7% for the month (seasonally adjusted) and by 3.6% year-on-year to $ 13 billion:

Sporting goods, hobby, book and music stores: Sales increased 3.3% for the month to $ 9.4 billion (seasonally adjusted), but decreased 5.1% from Stimulus Miracle March:

Electronic and white goods stores: Sales rose 3.3% for the month to $ 7.5 billion, seasonally adjusted, but fell 9.7% from the Stimulus Miracle March. This category covers specialty stores, such as Best Buy. Sales of consumer electronics and appliances are huge, but it is spread across many types of stores, such as General Merchandise (above). And much of it has gone to e-commerce.

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