March retail sales will see a pop of greater than 1% when the Census Bureau releases the data on Thursday because households are acting rationally to pull forward consumption in advance of higher tariffs.
Auto sales, for example, jumped to an annual rate of 17.77 million from 16 million in March, an increase that will bolster the top-line figure for retail sales but at the same time create the conditions for a sharp reversal in April.
This spending dynamic is a reflection of shifting consumer attitudes on real income gains and buying conditions as tariffs are implemented.
Only 35.1% of consumers expect real income gains over the next year, continuing a decline in those expectations, according to the University of Michigan’s consumer surveys.
Consumers, after all, are expecting higher inflation, which we believe will advance by a minimum of 1% to 1.5% over the next 90 days because of trade taxes.
As a result, consumer perceptions on whether it’s a good time to make significant purchases are changing. Buying conditions for vehicles, houses and consumer durables all declined in March, according to the University of Michigan surveys.
In the end, these dynamics do not bode well for household spending, and economic growth.
