U.S.: Consumer Spending Much Weaker Than Expected

Daily Forex Fundamentals | Written by TD Bank Financial Group | Apr 14 09 14:19 GMT |

U.S. retail sales declined for the first time since December, falling 1.1% M/M. Excluding autos and gas, sales were down 0.8% M/M. The details of the report were simply awful, as spending in almost every category declined U.S. retail sales posted a dramatic 1.1% M/M drop in March, ending two consecutive months of gains. This decline in consumer spending was in stark contrast to the market consensus for a modest 0.3% M/M increase, and comes on the heels of the upwardly revised 0.3% M/M gain (previously reported as -0.1% M/M) the month before. Sales excluding autos were also quite weak, falling by 0.9% M/M. This was also worse than the market expectations for a flat print. Core retail sales, which strip out sale of autos and gasoline were also soft, declining by 0.8% M/M. On a year ago basis, all three measure are down significantly. Despite the massive drop in retail sales, the 3-month annualised trend remains favourable, rising by 4.0% (from -3.8%), while the 3-month annualised trend for sales excluding autos is up 6.9%, from -2.7%. The details of the report were simply abysmal. Spending in almost every category declined, with the exception of spending on food (which rose 0.5% M/M) and health and personal care (rising 0.4% M/M). On the other hand, there were big declines in spending on motor vehicles (down 2.3% M/M), furniture and home furnishing (down 1.7% M/M), electronics (down 5.9% M/M), gasoline (down 1.6% M/M), clothing (down 1.8% M/M) and general merchandise (down 0.2% M/M). Spending at department stores was also weak, falling by 0.3% M/M. Prior to this report, the flow of U.S. consumer reports had all consistently surprised (pleasantly) to the upside, and we were certainly mindful that sales were due for a correction, though tentative indicators for car sales, same store sales and gasoline sales in March had suggested otherwise. Nevertheless, despite this very weak spending report for March, it appears likely that consumer spending may add favourably to U.S. economic activity in the first quarter, due in large part to the strong performances in the first two months of this year. However, this is unlikely to form a platform for a sustained rebound in overall consumer spending in the U.S as the backdrop for the U.S. household remains quite weak. TD Bank Financial Group The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.