Big Upward Revision to March

• Retail sales increased 0.9% in April, with a big upward revision to sales in March.
• Sales growth was strong across segments, although gasoline sales fell due to lower prices.
• Although consumers are concerned about inflation, they continue to spend and sales growth should remain solid throughout 2022.
• Consumer spending growth will shift to services from goods.

Retail sales increased 0.9% in April from March, much better than the consensus expectation for a 0.4% increase. Sales excluding autos and parts were up 0.6%, sales excluding gasoline were up 1.3%, and sales excluding autos and gas were up a very solid 1.0%.

Control sales—sales excluding autos, gasoline, food service, and building materials, which go into nominal consumer spending in GDP—rose a very good 1.0% over the month.

Total retail sales growth in March was revised much higher, to 1.4% from the initially reported 0.5%.

Sales growth in April was broad-based. Sales for autos and parts rose 2.1%, largely because of higher volumes, while sales at gasoline stations fell 2.7% as gas prices declined somewhat from March. Online sales rose more than 2% over the month, with sales at restaurants and bars up 2% as consumers continue to feel more comfortable going out. There were sales gains of close to 1% for electronics and appliances, furniture and home furnishings, and clothing and accessories.

Pay attention to what consumers are doing, not what they’re saying. Measures of consumer confidence have fallen because of high inflation, but households continue to spend on a wide variety of goods and services. Although high inflation, in particular high gas prices, are a drag for consumers, it is greatly outweighed by the positives. Especially important is the extra $2 trillion that households saved up during the early stages of the pandemic, thanks to government aid and limited opportunities to spend, that they are now deploying. Other positives include strong job and wage growth, rising home values, and low (albeit rising) interest rates.

Consumer spending growth will decelerate through the rest of this year and into 2023 as high inflation continues to take a toll, job and wage gains slow, and interest rates continue to increase. But with solid household fundamentals, there is minimal danger of recession this year, despite all of the doom and gloom in the news, although 2023 will be more difficult.

Household spending growth will shift from goods to services as consumers feel more comfortable going out. The major exception will be autos: production problems are holding back vehicle sales, but they will gradually recover as the automakers resolve those issues. 

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