March proved to be a strong month for US retail sales. Overall sales increased by 4.5 per cent – the best rate of growth since April 2025. Meanwhile, core retail sales increased by an even stronger 5.9 per cent.
While there is no taking away from the performance, it is worth looking at the detail behind the numbers and some of the nuances in the data. These suggest that the March uplift is exceptional rather than a new normal.
As ever, inflation flatters the growth. When it is removed, core retail grew by 3.1 per cent in volume terms. This is still remarkably solid but is not quite as punchy as the headline figure suggests. Unfortunately for consumers, inflation bit harder in March, and all indications point to the fact that it will continue to do so in the months ahead. This will likely put volumes under even more pressure.
All that said, volumes for March are still running ahead of the long-term average. This is largely underpinned by tax refunds, which more people are getting, with the average refund running around 11 per cent higher than last year. That shot in the arm has boosted spending. And it has done so off the back of a relatively weak prior year, which aids the growth rate.
An earlier Easter also pulled a little spending into March from April. Admittedly, this does not have a huge impact, but it provides the icing on an already very well-turned-out cake. The flip side is that April growth may be more subdued by the calendar shift.
Under the headline numbers, there are also pockets of consumer caution. Big ticket purchases remain under pressure. And even with tax refunds, a lot of consumers are opting for smaller indulgences rather than committing to big spending.
This continues the attitude of careful consumption, where people are thinking more about what they buy and are generally being more discriminating with spending, even when they do have money. We do not see this changing much over the balance of 2026.
One area of note is the sales at gas stations. Because of soaring gas prices, these rose by 18.3 per cent over the prior year. This flatters the overall retail sales growth – excluding gasoline, the 4.5 per cent growth becomes 3.5 per cent. However, the dynamic is not good for retail as it saps discretionary spending elsewhere. Admittedly, it’s not so much of a problem when the windfall of tax refunds is coming in, but it becomes significantly more of an issue when that impact fades.
On a sector basis, clothing stores had a strong month with sales up 7.0 per cent over the prior year. Inflation was much higher in May, which leaves underlying volumes up 3.8 per cent, but there has been a degree of splurging as consumers treated themselves via tax refunds. Refreshing closets for spring was also evident in March, with many consumers receptive to new styles.
Electronics stores had a good month with sales up by 6.1 per cent. A lot of this has come off the back of tax refunds, as these big-ticket purchases remain a popular outlet for a windfall of cash. This has been aided by a pickup in the purchase cycle as some of the items bought during the pandemic come up for replacement.
Home furnishing stores did not join the party, with reported sales down by 0.4 per cent. As we have noted before, much of this is due to the focus on smaller furnishings items, which are bought through other channels like generalists, department stores, or off-price and are not reported in the furniture segment. However, there is no doubt that the weak housing market continues to act as a drag.
Sales at supermarkets and grocers were flat on the year. Even with more buoyant income, consumers continue to retrench to value chains and reduce volumes to offset higher food costs.
Overall, solid March retail sales round off a good start to the year for retail. However, the gathering of some economic storm clouds could dampen future expectations.
