Retail sales surged in March as federal stimulus checks bolstered wallets and the rollout of Covid-19 vaccines boosted spending at stores.
The Commerce Department said Thursday that retail sales soared a seasonally adjusted 9.8% in March compared with the month prior.
It was the steepest increase since May last year, when the retail sector stared to rebound from the early spring shutdowns across the nation.
The uptick was also far greater than the 5.9% bump economists surveyed by Refinitiv had predicted — and a sizable turnaround from the previous month. In February, retail sales fell more than expected, declining 2.7% according to the revised data.
Stripping out cars, auto parts and sales at gas stations, which tend to be more volatile, retail sales rose 8.2% last month.
Sales at sporting good, hobby and book stores jumped 23.5% in March, while clothing store sales grew 18.3% and electronics and appliance store sales increased 10.5%. Sales at online retailers grew 6%.
Restaurant sales increased 13.4%, a promising sign for the beleaguered industry.
The sharp March rebound came on the heels of the $1,400 stimulus checks included in President Joe Biden’s American Rescue Plan.
“When the government gives most people $1,400, spending naturally follows, even as funds also pour into savings and debt payoff,” Ted Rossman, senior industry analyst at Bankrate, said in a note.
“Spending will almost certainly drop back in April as some of the stimulus boost wears off,” said Michael Pearce, senior US economist at Capital Economics, “but with the vaccination rollout proceeding at a rapid pace and households finances in strong shape, we expect overall consumption growth to continue rebounding rapidly in the second quarter too.”
An improving jobs market, more people getting vaccinated and loosened restrictions on stores and malls also likely helped.
The job market recovery gathered steam last month with 916,000 jobs added, the biggest gain since August. And the more people are gainfully employed, the more they can spend.
Jobless claims data from Thursday showed that the labor market recovery is still chugging along in April. Although another 576,000 American workers, adjusted for seasonal swings, filed for first-time unemployment benefits last week, that was a much lower number than economists had predicted.
Meanwhile, more than one-third of the US population has received at least one vaccine dose, according to the CDC. Vaccinations are key to a full reopening of the economy and encouraging wary consumers to shop in stores and eat at restaurants.
The vaccine rollout is “generating a higher level of consumer confidence,” Bed Bath & Beyond (BBBY) CEO Mark Tritton said on a call with analysts Wednesday. “It’s definitely affecting our traffic trends.”
Some clothing retailers and restaurants hit hard by the pandemic say they expect to benefit from increased consumer demand in the coming months.
Levi (LEVI) CEO Chip Bergh said last week that there was “a lot of pent-up demand from people being stuck at home and hunkered down and not really doing a lot of shopping.”
But there are still big question marks, including what happens when the stimulus package wears off and how rising coronavirus case counts in states like Michigan impact consumer sentiment.