As warmer weather approaches, economists are expecting retail sales to rebound. Yet, experts predict that next Monday’s advanced retail sales report, released by the Census Bureau and the Department of Commerce, will not show that March’s retail sector has made up for sales lost during earlier months.
Economists estimate that the increase will be of around 0.8 percent from the previous month —better than February’s 0.3 percent, though not a spectacular rebound considering that retail sales decreased during both December and January.
“A serious drain in household spending power was an increase in heating costs,” says Louis Crandall, chief economist at Wrightson ICAP LLC, a research firm.
The winter’s unusually cold weather created a spike in heating costs for consumers who were then left with less money to spend. Furthermore, the soft employment growth in the past months has had a negative effect on retail sales because it means there are less people out spending their money.
Crandall says that it will “take an extra month or two” for retail sales to look healthier. And although he says he expects growth to resume in the retail sector, he does not expect it to “snap back”.
The strongest sector in the retail sales report will probably be auto sales. Already, automakers have reported a strong increase in their March sales after a weak start of the year. This suggests that low sales in previous months were caused by the cold weather.
“Auto sales were unusually weak in December and January,” says Stephen Stanley, chief economist at Pierpont Securities LLC. However, he says that March made up for what was lost before. He expects Monday’s indicator on retail sales to show a 0.5 percent total increase. Still, the number will probably be much lower when excluding auto sales —only 0.1 percent, he says.
According to the government’s job report for March, there was little change in employment in retail trade. This suggests that the retail sector is not expecting a major increase in activity in the short-run that would warrant increasing the number of jobs. With better weather, however, economists expect a recovery in the sector, though not a jump like the one that auto retail sales have experienced.
“I don’t expect that to carry over to other sectors,” Crandall says.