US DATA: Autos Drive Overall March Retail Gains As Restaurants Recover
March retail sales largely met expectations, with the headline growth figure of 1.4% M/M in-line and up from 0.2% prior. The core categories were more mixed, but this was more than offset by very strong revisions, particularly for the GDP-input Control Group which rose by 0.4% (0.6% consensus) after an upward revision to prior to 1.3% (was 1.0%). Overall this will probably be viewed as a positive report in terms of upward revisions to GDP estimates for Q1.
- The first thing that was being eyed in this report was the degree of tariff front-running pre-"Liberation Day" (Apr 2). We saw it in some areas but perhaps not as much as we might have expected in others.
- Most prominent in front-running was vehicle sales (which are ex-control group) seeing a 5.7% M/M rise, a 26-month best, following two months of contraction (the overall motor vehicles/parts category rose 5.3%). This was well-flagged by industry sales data as buyers rushed to dealerships to beat tariff-related price hikes, and as the largest category in retail sales easily drove the overall retail sales advance (and is why ex-auto sales slowed to 0.5% M/M vs 0.7% prior).
- Elsewhere, electronics/appliance stores saw 0.8% growth, fastest in 5 months. Clothing purchases and sporting goods picked up 0.4% and 2.4% M/M respectively - each, again, after a couple of months of contraction. Building materials/gardening (also ex-control group) jumping 3.3% M/M after 5 consecutive monthly contractions, though that may have been partly related to improving weather after a tough start to the year.
- On that note, food services and drinking places (the 3rd-largest retail category) saw a sharp rebound to 1.8% M/M, the best rate in 26 months - from -0.8% prior (which reflected a substantial upward revision from -1.5%). There had been some concern that this category's weakness in February was a sign of sharply weakening discretionary spending in a category that isn't directly impacted by tariff front-running, but conditions here don't appear as recessionary as previously thought.
- But we did see slower growth in many categories in March vs Feb: these included non-store retailers, ie online shopping (0.1% after 3.2% for what is the 2nd largest retail sales category), with miscellaneous store retailers, furniture, and health/personal care sales also slower. Food and beverage sales growth was steady at 0.2%, while gasoline sales 2.5% though that was primarily a price effect (gas CPI fell 6+% in the month).
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US DATA: Control Group Jumps But Overall Retail Momentum Still Slowing
Headline advance retail sales were much weaker than expected in February at 0.2% M/M (0.6% expected, -1.2% prior rev from -0.9%), but this was offset by strong performances in core categories. Ex-auto/gas rose 0.5% (vs 0.4% expected, with the "beat" more than offset by a downward revision to prior at -0.8% vs -0.5% prelim). But control group sales rose 1.0% vs the 0.4% expected, more than offsetting the downward revision to Jan (-1.0% vs -0.8% prelim).
- The control group reading - which is an input into GDP - was a 5-month high.
- The reason for the discrepancy between the fairly soft headline growth and the very strong control is that the latter excludes gasoline (-1.0%, weakest in 5 months, after +1.3%) and food services which unrounded was the weakest in 24 months (-1.54% after flat in Jan). That said, control group sales also exclude categories that rebounded if only to soft rates of growth: auto dealers (-0.6% after -3.8%) and building materials (+0.2%, strongest in 5 months, after -1.9%, which was the worst in 12 months).
- Bigger-picture, retail sales continue to slow: the 3M/3M annualized rate fell to 2.3% for headline (7-month low), with control group - which is a good gauge for PCE goods consumption in GDP - at 2.6% (11-month low). Ex-autos/gas 3M/3M annualized was a 56-month weakest 0.5% - the lowest since June 2020 (ie pandemic).
- This is starting to show in the Y/Y rates total at 3.1% Y/Y (4-month low), ex-autos/gas at 3.5% (6-month low), though control group picked up to 4.4% from 3.7%.
US DATA: Empire Mfg Survey Displays Further Signs Of Tariffs Disruption
The Empire State manufacturing survey had all the hallmarks of tariffs disruption in the first regional Fed mfg survey for March, with orders slipping and input price inflation at its fastest in more than two years.
- The headline manufacturing index slipped -20 (cons -2) in March from +5.7. It’s the lowest since Jan 2024 having been at its strongest reading since a particularly strong 20.2 in Nov and before that Apr 2023.
- New orders played a prominent role in latest weakness, sliding from +11.4 to -14.9, just below the -14.7 in Oct for technically the lowest since Apr 2024 and before that May 2023.
- Remember that it’s a particularly volatile survey more broadly, characterized by a monthly change standard deviation of 17pts - see the chart below for a comparison with the average regional Fed survey and ISM manufacturing.
- That said, the six month ahead measure for general business conditions has tended to be somewhat smoother and this saw another heavy decline to +12.7 for its lowest since May 2023.
- Employment dipped a little further, with -4.1 after -3.6, although that’s only the lowest since December.
- On the price side, prices paid increased further to 44.9 from 40.2 for now the highest since Feb 2023 and this continued to feed through to prices received, at 22.4 after 19.6 for the highest since May 2023.
GLOBAL POLITICAL RISK: Week Ahead 17-23 March
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MNI's Political Risk team has published its Week Ahead article looking at some of the major political events scheduled across the world over the next seven days. Includes info on US President Donald Trump's upcoming call with Vladimir Putin over the Ukraine ceasefire proposal, the vote in the German Bundestag to reform the debt brake, and the EUCO summit taking place 20-21 March.
