NEW YORK (AP) — Retail sales rose modestly in March, but higher prices for food, gasoline and other basics took a big share of consumers’ wallets.
Retail sales increased 0.5% after registering a revised 0.8% increase from January to February. Spending has been fueled by wage gains, solid hiring and more money in banking accounts. January’s increase of 4.9% was the biggest jump in spending since March 2021, when American households received a final federal stimulus check of $1,400.
Excluding an 8.9% increase at gas stations, overall retail sales were actually down 0.3% last month, the Commerce Department reported Thursday.
“They are spending selectively this month and the gasoline price spike from the Russian-Ukraine war was where most of the expenditures were made,” said Christopher S. Rupkey, chief economist at research firm FWDBONDS LLC.
Business at general merchandise stores were up 5.4%, while clothing stores sales rose 2.6%. Online sales were surprisingly down 6.4%. Restaurant sales rose 1%.
The retail report covers only about a third of overall consumer spending and doesn’t include services such as haircuts, hotel stays and plane tickets, areas that have been rebounding.
Retailers are closely monitoring Russia’s war with Ukraine and how it could weigh on shoppers’ confidence but also worsen inflation. The conflict has already limited supplies of wheat, vegetable oils, and electronic components like chips. It’s pushed up fertilizer prices that were already high, made scarce supplies even harder to find and squeezed farmers, especially those in the developing world. In addition to the Russian invasion, rising COVID-19 cases and renewed restrictions in China could worsen supply chain issues.
The Labor Department said Tuesday that its consumer price index jumped 8.5% in March from 12 months earlier, the sharpest year-over-year increase since 1981. Prices have been pushed up by bottlenecked supply chains, robust consumer demand and disruptions to global food and energy markets worsened by the war. From February to March, inflation rose 1.2%, the biggest month-to-month jump since 2005. Gasoline prices drove more than half that increase.
The March inflation numbers were the first to fully capture the surge in gasoline prices that followed Russia’s invasion of Ukraine on Feb. 24. Moscow’s attacks have triggered far-reaching Western sanctions against the Russian economy.
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The acceleration of inflation is happening in otherwise strong economy. In March, employers adding a robust 431,000 jobs — the 11th straight month in which they’ve added at least 400,000. For 2021, they added 6.7 million jobs, the most in any year on record. In addition, job openings are near record highs, layoffs are at their lowest point since 1968 and the unemployment rate is just above a half-century low.
Retailers have been forced to keep raising wages to stay competitive, but now they worry any progress that they made is being undone because higher prices are eating into workers’ earning power.
To protect themselves against any consumer spending downturn, retailers are cutting back on expenses, while taking a measured approach to ordering merchandise.
AP Economics Writer Paul Wiseman in Washington contributed to this report.