Can US Retail Sales Rebound As Inflation Cools?

Retail Sales in the U.S. declined more than expected by 0.6% (MoM) in March 2023, followed by a 0.7% decline in February, reflecting the challenging economic environment in the U.S. These figures are expected to decline further by 0.8% (MoM) in April, as quoted by While Retail Sales did increased 2.3% in March on a yearly basis, this  still represented the smallest yearly rise in 3 years (Figure 1).  



Figure 1: YoY US Retail Sales| Source: and the US Census



For 2023, retail sales are expected to decline by 4-6% according to US Census Data, which is still above the pre-pandemic average of 3.6%. This is compared to an annual growth rate of 7% in 2022 with a total of $4.9 trillion (Figure 2)




Figure 2: Annual USA- Retail Sales (April 2022)| Source: US Census Data and National Retail Federation Analysis



This decline in retail sales is most likely due to the Fed’s year-long increase in interest rates to push inflation lower and reduce domestic demand. Recent reports show a slowdown in employment growth and services sector activity in March.


Moreover, the end of the temporary Supplemental Nutrition Assistance Program (SNAP), which was put in place to help low-income individuals and families during the pandemic, could also have affected retail sales. This resulted in a $4B reduction in income, causing individuals to be more careful with their spending and prioritize necessary expenses over non-essential item, according to Morgan Stanley.


Retail Sales is a crucial indicator that provides valuable insights into consumer spending, which has a major impact on GDP. According to analysts, a positive figure typically strengthens the USD, but with the upcoming US debt ceiling standoff, market prices may remain unstable in the next few weeks or potentially months. Therefore, it is important for investors and traders to closely monitor the most recent economic news and plan their investing decisions accordingly.




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