March 2021 retail sales explode as consumers use incentive checks

A new series of stimulus checks pushed consumer purchases up sharply in March as the US economy continued to pressurize from aggressive congressional spending.

Retail sales were up 9.8% this month, the Commerce Department reported Thursday. That compares with the Dow Jones estimate of a 6.1% gain and a 2.7% decline in February.

Sporting goods, clothing and food and drink led to the spike and contributed to the best month for retailers since its 18.3% gain in May 2020, which came after the first round of stimulus checks.

A separate report showed that initial unemployment insurance claims plummeted, with the labor department reporting 576,000 new unemployment claims for the week ending April 10. That was by far the lowest total since the early days of the Covid-19 pandemic and represented a sharp drop from the previous week’s total of 769,000.

The Dow Jones claim estimate was 710,000.

As the job picture brightened, consumers took their $ 1,400 incentive vouchers and issued them aggressively. The money came to nearly $ 1.9 trillion thanks to the US Rescue Plan Act passed by Congress in March.

The legislation increased the total stimulus and bailout payments approved in the year since the Covid-19 pandemic began to about $ 5 trillion, fueled by the red ink required by tax authorities to keep the economy going.

Spending for the month was broad.

The critical hospitality industry was up 13.4%, thanks to increasing relaxation of restrictions as Covid vaccines accelerate to a pace of more than 3 million a day.

Spending on sporting goods grew the most at 23.5%, followed by clothing and accessories at 18.3% and auto parts and dealers at 15.1%.

The March retail sales report was another sign that consumers generally remain healthy and ready to spend, even as more and more stimulus controls are moving towards savings rather than spending.

“Spending will almost certainly decline in April, as some of the stimulus impulses wane, but with the roll-out of vaccinations progressing at a rapid pace and household finances in good shape, we expect overall consumption growth to continue in the second quarter. will continue to pick up quickly. ”wrote Michael Pearce, senior US economist at Capital Economics.

A recent report from the New York Federal Reserve indicated that stimulus recipients expect to save 41.6% of their checks and spend 24.7%. After the first inspection round in the spring of 2020, consumers have saved 34.5% and spent 29.2%.

As the recovery accelerated, consumers have seen the strongest signs yet of mounting inflationary pressures. The consumer price index rose 2.6% in March compared to a year ago, partly thanks to a sharp rise in gasoline prices. The annual profit was the largest since August 2018.

Thursday’s economic data also showed more signs of a thaw in the labor market.

The plunge in jobless claims generated the lowest weekly number since March 14, 2020, just after the official pandemic statement. Nearly two weeks later, weekly claims filings would top out at a whopping 6.15 million, easily the worst week in US history.

Since then, the labor market has improved dramatically, with the unemployment rate falling from a pandemic peak of 14.7% to the current 6%. The nonfarm payroll of 916,000 in March brought more hope that the recovery is speeding up.

Despite the large decline in weekly claims, persistent claims changed little to 3.73 million.

The four-week moving average for weekly claims fell to 683,000, also the lowest since March 14.

The total of those who received benefits under all government programs fell by more than 1.2 million to 16.9 million for the week ending March 27. This decrease was mainly due to a decrease in the number of applications for pandemic programs.