Here's a puzzle for you: American consumer sentiment in March was the worst on record. Gas prices shot from $3 to over $4 in just three weeks. A major global oil chokepoint was closed, knocking out millions of barrels of daily supply. By all accounts, people were feeling pretty grim about the economy.
And then they went out and spent a ton of money.
Advance retail sales for March rose 1.7% to $752.1 billion, according to data released Tuesday. That wasn't just a beat—it blew past the 1.4% economists were expecting and marked the biggest monthly jump since January 2023. Even February's number got a little upgrade, revised up from 0.6% to 0.7%.
Your first guess might be gasoline. And you'd be partly right. Receipts at gasoline stations surged 15.5% for the month, a near-record swing that was almost entirely about higher prices at the pump, not people buying more gallons. That single line item explains roughly two-thirds of why the overall number beat expectations.
But here's the interesting part: take gasoline out of the equation, and the story doesn't fall apart. Retail sales excluding gasoline stations still rose 0.6%. That's the largest increase for that measure since, you guessed it, January 2023.
Even more telling is the "control group" retail sales number. This metric excludes autos, gasoline, building materials, and food services—the noisy stuff—and feeds directly into the calculation of consumer spending in GDP. It climbed 0.7% in March. Economists had only been looking for a 0.2% gain. That's a beat by three-and-a-half times.
In simple terms, the U.S. consumer keeps spending, and they're shrugging off the shock at the pump.
"Americans might be unhappy about the economy and inflation, but they are still spending," said David Russell, global head of market strategy at TradeStation. "Today's retail sales data is consistent with the tight labor market and likely got a boost from tax refunds."
He added, "Higher gas prices are taking a bite, but the damage is limited. While these numbers are good news for the economy overall, they don't necessarily support rate cuts by the Federal Reserve."
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