Yesterday the US Census Bureau reported:
Advance estimates of U.S. retail and food services sales for March 2025, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $734.9 billion, up 1.4 percent (±0.5 percent) from the previous month, and up 4.6 percent (±0.5 percent) from March 2024. Total sales for the January 2025 through March 2025 period were up 4.1 percent (±0.5 percent) from the same period a year ago. The January 2025 to February 2025 percent change was unrevised from up 0.2 percent (±0.2 percent). Retail trade sales were up 1.4 percent (±0.5 percent) from February 2025, and up 4.6 percent (±0.5 percent) from last year. Motor vehicle and parts dealers were up 8.8 percent (±1.8 percent) from last year, while nonstore retailers were up 4.8 percent (±1.4 percent) from March 2024.
Many observers treated this significant sales increase as reflecting consumer expectations of higher prices or emerging product unavailability. For example the Associated Press wrote, “U.S. shoppers stepped up their shopping last month, fueled by a spending spree on big ticket items, particularly cars, before President Donald Trump’s expansive new tariffs started kicking in. But analysts were quick to point out that the data wasn’t a sign of strength but underscored the extreme economic uncertainty that shoppers face and how they want to get ahead of higher prices.” (More and more and more.)
In any case, March retail results confirm a continued ability and willingness to consume — even after the consumption rate has rather consistently climbed for four years (see chart below). As demonstrated by the similar slopes displayed below, retail sales track (lead? follow?) other consumption indicators. In the post-pandemic period to date consumption has ranged roughly four to five percent above sustained pre-pandemic trends. Will this continue as tariffs have their effects? How will tariffs impact consumption shifts between product categories? Will reduced consumption in some categories mostly result in higher consumption in other categories? Might reduced consumption in particular categories have sufficient impact on overall wages-earned (people employed) to suppress overall consumption? How do we differentiate between lagging indicators and what could be characterized as “loss leaders?”
Pre-tariff US economic conditions are strong. The administration expects to preserve and build on this strength — even if there are some “transition problems.” Others are concerned these strengths — and other advantages — are being squandered.
