Market Insider

March retail sales are expected to have surged as consumers spent $1,400 checks

Key Points
  • March retail sales are expected to be up 6.1%, when they are reported Thursday morning at 8:30 a.m. ET, according to the Dow Jones consensus of economists.
  • But some economists expect much higher sales, of 10% or more, based on the economic reopenings, the $1,400 stimulus checks sent to individuals, and more vaccinations.
  • "It's reopening. It's stimulus money. It's weather pay back, all conflating to be a gangbuster number," said one economist. "I think we're going to see very strong numbers going forward. We're off and running."
A shopper wearing a protective mask checks out at a Costco store in San Francisco, California, on Wednesday, March 3, 2021.
David Paul Morris | Bloomberg | Getty Images

March retail sales are expected to be strong, and some economists say stimulus checks may have quickly made their way into the economy, contributing to an even bigger gain of 10% or more.

The March sales data, released at 8:30 a.m. ET Thursday, could be the first in a series of powerful reports on consumer spending, as vaccinations increase and the economic reopening continues. The $1,400 fiscal stimulus checks sent to individuals, starting in mid-March, appear to have spurred spending in an environment of pent-up demand.

"We expect the March retail sales report to be outstanding with headline and core retail sales both surging more than 11%" month over month, wrote Bank of America economists. "Stimulus, reopening, and better weather served as a potent cocktail for consumer spending."

A multi-month burst of consumer spending is expected to kickstart an economy that is expected to boom this year. The strongest growth is expected in the current quarter, which some economists say could see gross domestic product growth of more than 10%. That compares to the second quarter of last year when the economic shutdowns resulted in a collapse in the economy, with GDP decreasing 33.3%.

Economists expect March retail sales rose a consensus 6.1%, or 5.3% excluding autos, according to Dow Jones. That compares to a sales decline of 3% in February, when severe winter weather resulted in a freeze across the south with massive power outages in Texas.

But some economists say that spending data shows that sales could be even stronger. "It's going to be up over 10%.Other than May of last year, it will be a record. There's a lot of vehicle sales, higher gasoline prices, and then everything else," said Mark Zandi, chief economist at Moody's Analytics. "The restaurants are coming back. Clothing stores are up a lot. This is the retail reopening and that's going to be reflected in the number."

Zandi said he expects retail sales rose 10.3% over February, and should be up 28% from year ago levels.

"It's reopening. It's stimulus money. It's weather payback, all conflating to be a gangbuster number," said Zandi. "I think we're going to see very strong numbers going forward. We're off and running."

Beige Book shows labor difficulty, but is transitory, says BofA's Michelle Meyer
Beige Book shows labor difficulty, but is transitory, says BofA's Michelle Meyer

Zandi said business-to-business spending data supports his view. According to software firm Cortera, recently acquired by Moody's, spending by all businesses in March was up 14.5% over last year, while spending by retailers was up 9%.

Zandi said retailers and other businesses, like airlines, that benefit from a reopening economy did better in March than those businesses catering to working at home for the first time since the beginning of the pandemic.

"Spending increased in most retail segments, with restaurants, furniture stores, clothing stores, gas stations, and sporting goods stores leading the charge," according to Cortera. "Spending declines were seen in food & beverage stores as consumption shifted back to restaurants and bars."

Cortera, which tracks about $1.7 trillion of business spending, found that spending was 14.6% lower than last year for food and beverage stores, but food and beverage services, like bars and restaurants increased, spending just under 20% more than last year.

Bank of America's credit card spending also showed a surge in late March. BofA economists said there was a 67% surge in card spending over the seven day period ended April 3. The spending in that period was also 20% higher than the same period of 2019.

"Animal spirits have turned remarkably higher with the conference board measure of confidence increasing to 109.7 in March, the biggest one-month gain since April 2003," noted Bank of America economists. "Consumers are able to ramp up spending while still increasing savings - we think the saving rate will be about 20% - if not higher - in March."

NatWest chief U.S. economist Kevin Cummins said he expects a 10% gain in March sales and concedes it's on the high end of forecasts. He expects sales should be boosted by the $1,400 stimulus checks sent to individuals, which started reaching bank accounts around March 17.

"The back end of the month should be very strong," he said. "If you look at auto sales, that was the highest level in four years. It seems like restaurants are getting more crowded, with outdoor seating."

The range of forecasts is unusually wide, with economists expecting 4% to 11.5% gains. That means the market reaction could be volatile.

"Normally, prepandemic, the range might be 1 percentage point [apart], maybe 2," said Michael Schumacher, Wells Fargo diretor of rates.

Bank of America economists said the retail sales data could kick off another debate, about whether business will pick up spending to lift the economy after surging consumer spending.

"With the data confirming consumer strength, the debate now shifts to the next stage of the recover," note Bank of America economists. "Will this prove to just be a sugar high with a painful hangover or will it kick-start a positive feedback loop which leads to a sustainable recovery? We expect the latter but it will depend on a positive response from Corporate America."