The condition of the American consumer is impaired and will be for some time. The combination of soaring unemployment and shelter-in-place policies across the economy sent U.S. retail sales down 8.7% in March.
The core ex-autos number declined by 4.5%, while the ex-gasoline metric dropped by 8%, all of which point to what in the first six months of the year will most likely be the worst decline in consumer outlays in the history of the time series.
It is important to note that the March data only partially captured the impact of the self-distancing policies put into place around the country. The nadir in household consumption will be captured in the April and May data, so policymakers and investors should anticipate a broader and deeper downturn in retail sales ahead.
Despite human behavior being somewhat sticky, we do expect behavioral changes following the long shelter-in-place polices that will affect the composition of demand across eating and drinking establishments; within retail, food and beverage consumption; and in the control group that feeds into the calculation of gross domestic product.
Policymakers and investors should anticipate a broader and deeper downturn in retail sales ahead.
Because of the noise in the data on a month-to-month basis, our preferred metric of analysis is the three-month average annualized pace of sales that we believe captures the true trend in the condition of the consumer and household spending. Using that metric, household spending declined 9.2%, while the control group declined 5.3%. Spending excluding autos dropped 3.1%, ex-gasoline 7.6%, ex-food service 6.3% and ex-auto and building materials 5.1%.
That data on a monthly basis was even bleaker. Spending on motor vehicles and parts dropped 25.6%, eating and drinking establishments 26.5%, sporting goods 23.3%, department stores 19.7%, furniture 26.8%, and clothing sales collapsed at a 50.5% pace.
Food and beverage spending, though, increased 25.6%. Non-store retailers, a proxy for e-commerce, increased 3.1%, with outlays on health and personal care advancing 4.3% and building materials 1.3%.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center