Core retail sales in March didn’t fall as much as expected with a .3% m/o/m drop vs the forecast of down .5% after a .5% gain in February. Auto sales were weaker, down by 1.6% m/o/m, and almost flat y/o/y, up by .4%. Building materials were lower by 2.1% and 4.3% y/o/y with housing obviously softer. Retail sales elsewhere were mixed with clothing sales weaker for the 5th month in 6, down for the 4th month in 5 for furniture and lower for 5 out of 6 months in electronics. Department store sales were down by 2.5%. Online sales were flat but still up 14% y/o/y. Sales at restaurants and bars were a continued show of strength, rising 1.9% m/o/m and up by 12.4% y/o/y.
Core goods prices by the way in CPI were up .2% m/o/m.
Bottom line, looking at sales ex gasoline, so we include here the drop in autos and building materials, saw a sales decline of .6% m/o/m and negative for the 4th month in the past 5 with January up 3.6%. So, over the past 5 months, retail sales ex gasoline are up a total of 1.3% in nominal terms. Core goods prices during this time frame were down by one tenth, so 1.4% REAL. For perspective, in the prior 5 months sales ex gasoline rose 3% while inflation was up 1%, so 2% REAL. As stated this morning, a lot changed in the middle of March and today’s data did not really capture any possible changes so the April figures become crucial.
Austan Goolsbee on CNBC reiterated his more cautious stance of policy from here but of course wouldn’t commit on tv. Governor Waller just now is basically saying he wants to hike again where in his speech he said “Because financial conditions have not significantly tightened, the labor market continues to be strong and quite tight, and inflation is far above target, so monetary policy needs to be tightened further. How much further will depend on incoming data on inflation, the real economy, and the extent of tightening credit conditions.”
My 2 cents, each reason Waller gave for wanting to hike again is rear view mirror analysis. There is no way that what happened on March 9th filters thru an economy immediately. It takes time but we have seen loan data since then and they have fallen so the wheels are in motion. You read what I wrote on Fastenal for March. Waller though doesn’t seem to be in the mood for patience and while I respect the fight against inflation, I reiterate that a pause doesn’t mean the fight is over as they can always hike at the meeting thereafter.
Yields went to the lows of the day on the Waller comments, the dollar is stronger and gold is pulling back.