US retail sales increased more than expected in March, adding to a brighter outlook for Q1

US retail sales increased above expectations in March, adding to signals that the economy performed well in the first three months of 2024.

Retail sales rose 0.7% month on month in March, against 0.9% in February, revised higher from 0.6% and beat expectations for 0.3% increase.

The report followed news this month of strong employment gains in March, and reinforced expectations that the Federal Reserve could delay cutting interest rates this year.

Annualized retail sales rose to 4.0% last month, up from 2.11% in February, while core retail sales, excluding automobiles, gasoline, building materials and food services, which correspond most closely with the consumer spending component of gross domestic product, rose 1.1% in March, from upwardly revised 0.5% rise in February and well above 0.3% consensus.

Spending in the US continues to keep strong momentum despite higher inflation and borrowing costs, as labor market remains tight, and wages increase offset threats to households from lower income.

Economist expect that spending will probably slow from the fourth quarter’s pace, but it likely remained sufficient to contribute to projected 2.4% economic growth in the first quarter, after the US economy grew by 3.4% in the last three months of 2023.