Retail sales increased by 1.6% in March, a result that was stronger than consensus expectations and the best monthly result since November of last year.
Retail stores likely benefited from the early Easter and the unseasonably warm weather, which may have encouraged consumers to start their spring shopping early this year.
Of particular note is the surge in motor vehicle sales in March, which was up 7.5% in March and shows a very strong 16.1% gain year-over-year.
Many consumers have delayed large purchases in an effort to shore up their personal balance sheet and to hedge against the potential for further economic deterioration.
As the recovery prompts employers to ramp up hiring efforts, the potential for a so-called virtuous, self-reinforcing cycle of growth and employment gains should support retail sales as the year progresses.
Nonetheless, our enthusiasm is tempered by the recognition that U.S. households remain constrained by high debt levels and the aftermath of the collapse in home prices in recent years. Retailers should continue to get a boost as confidence improves, but we still anticipate that broad economic growth will be constrained by these larger structural concerns that will take years to address.