Retail Sales Witness Largest Increase In 18 Months: 5 Picks
Zacks Investment Research | Apr 22, 2019 07:38AM ET
In March, retail sales rebounded strongly from the decline suffered in the previous month. This latest release from the U.S. Census Bureau added to the series of economic reports, which indicate that the economy is gathering steam after a soft start to the year. Gains were led by autos, gas stations, apparel stores and home furnishing outlets.
Meanwhile, jobless claims for the week ended Apr 13 plunged to their lowest level since September 1969, defying most expectations. It is quite clear that a robust job market and a pickup in wage growth are fueling a rise in consumer spending. This is why it makes sense to invest in those categories that are the primary catalysts for the rebound in retail sales.
Spike in Gas Prices Boost Receipts at Gas Stations
Retail sales for March increased by 1.6%, the sharpest gain registered since September 2017. This was significantly higher than the consensus estimate of an increase of 0.9% and represents a rebound from February’s decline of 0.2%. Gains for the month were led by gas stations, where receipts climbed by 3.5%.
Spending at gas stations increased after the average price of gas climbed 10% across the country in March to $2.62 a gallon, per government data. These are the highest prices experienced since last November.
Autos, Furniture, Apparel Lead Gains
Other major gainers include motor vehicles and parts dealers. Sales of automobiles and related parts increased by 3.1%, the highest gain registered so far this year. This was the primary driver of the headline number since auto receipts make up nearly 20% of all retail sales.
Other major gainers for the month were furniture and home furnishing stores, and clothing and accessories stores, sales at which increased by 1.7% and 2%, respectively. While department store sales remained flat, sales at nonstore retailers, which include online retailers, increased by 1.2%.
Robust Labor Market, Wage Gains Fuel Spending
Meanwhile, a report from the Department of Labor revealed that jobless claims for the week ended Apr 13 declined by 5,000 to a seasonally adjusted level of 192,000. This is the lowest level recorded in nearly 50 years and a drastic departure from the consensus estimate for an increase to 206,000.
The metric has now moved lower for five successive weeks. This gives credence to the view that a robust labor market is boosting wage growth, which in turn is raising American purchasing power.
In March, average hourly earnings increased 4 cents to $27.70. The year-over-year increase in earnings declined from 3.4% to 3.2%. But even then, wages continue to increase at their fastest pace in a decade. (Read: Zacks Investment Research
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