Retail Sales Drop in March

The US Census Bureau released the nominal read of retail sales showed a drop of 0.4 percent in March compared to February. Despite the decline, the reading was still an increase of 2.8 percent on a year-over-year basis on an aggregate of all items including fuel, healthcare services and food.

Nominal discretionary retail sales that included home furnishings, home garden and building materials, department store sales and consumer electronics dropped 0.4 percent from February and fell 0.64 percent compared to the year before. When adjusted for inflation, real discretionary retail sales dropped 2.27 percent over the same period.

There seemed to be a rough correlation between strong retail spending and strong home value appreciation before the housing sector collapse. There is also a stronger correlation when home values began to drop.

The year over year change to normal discretionary retail sales showed a coincidental change to home values and consumer spending at the boom and then at the bust. Home values have continued to drop as retail spending remained low but didn’t have a consistent contraction.

When adjusted for inflation, the rough correlation between the year over year change to the discretionary retail sales series as well as the year over year S&P/Case Shiller Composite series have become more significant.

This is the second time in three months that retail sales contracted in March. This is an indicator that the nation’s economy has slowed down. Readings for retail sales have been volatile since the start of the year.

The drop in March was attributed to the increase in tax rate that took effect at the start of the year. This could also be affected by several temporary factors connected to the weather. US producer prices got their largest fall in 10 months in March as the cost of gasoline dropped.