Commentary Directory
- Q1 GDP Growth Jumps 1.1% on Strong Personal Consumption
- A Strong March Leads to a Surge in Chinese GDP in Q1 2023
- Durable Goods Retail Sales Suffer from High Interest Rates and Wary Consumers
- Choppy GDP Means UK Should Avoid Q1 Recession
- Japanese Consumer Confidence Jumps to Highest Level in Over a Year
- The End of Summer Sees the End of Disinflation in Europe
- Labor Market Indicators are Starting to Unify on Easing in Hiring
- Inflation and Tight Financial Conditions Weigh on the German Consumer
- Euro Area Money Supply Contracts for the First Time Since 2010
- Dismal Economic Data Out of Germany
- Core Durable Goods New Orders See Gentle Uptrend in July
- More UK Data Pointing to Q3 Decline
- Whispers of a UK Contraction in Q3
- Japan's Core Inflation Resumes Uptrend in July
- Early July Economic Data Leads to a Sharp Increase in Q3 Growth Expectations
- UK CPI: Energy Inflation Crashes but Services Inflation is Still Sticky
- China's Weak Start to Q3 Means More PBoC Easing
- A Breather for the Eurozone as Inflation Hits Two-Year Low
- Germany's September CPI Report: A Clearer Picture of Inflation Trends
- US Manufacturing Demonstrates Resilience Amidst Volatility in August
- The ECB Prepares to Address Excess Liquidity Through the MRR
- Bank of Japan is Too Optimistic on Inflation
- The Bank of England Pauses in a Near Split Decision
- UK Inflation August Update: A Precursor to the Bank of England's Announcement
- Housing Starts Tumble in August Amid Rising Mortgage Rates
- US Retail Sales Grow at Fastest Monthly Rate Since the Start of the Year
- US Consumer Prices Surge in August Driven by Energy Costs
- August NFIB Survey Showed a Tough Environment for Small Businesses
- All Signs Point to a Weaker Labor Market in August
- Chinese CPI Trying to Buck the Deflation Trend
- Energy Prices Rise but the Core Disinflationary Trend is Maintained in September
- PPI's Quiet Rise and the Energy Elephant in the Room
- Small Businesses Grapple with Inflation and Financial Strain in September
- A Wacky September Jobs Report Shows Strong Labor Market
- A Look at the Fragile US Labor Market Ahead of the Nonfarm Payrolls Report
- Thoughts on GME and This Week in the Stock Market
- Record Home Price Levels Point to Strength in Post-Pandemic Economy
- The Stock Market Looks Overvalued, but It's Probably Not
- China GDP Growth Surpasses Expectations
- President-elect Joe Biden Introduces His "American Rescue Plan"
- Political Polarization Intensifies with Another Impeachment Along Party Lines
- Metal Demand Has a Bright Future in 2021 and Beyond
- What Happened to That US-China Trade Dispute?
- Civil Unrest, A Rising Threat to the 2021 Economy
- What's in the $900 Billion Relief Plan?
Durable Goods Retail Sales Suffer from High Interest Rates and Wary Consumers
Jacob Hess
April 14, 2023
- Retail Sales
Consumer activity continued to be weak in March as a result of a decline in durable goods sales. US retail sales fell -1.0% MoM in March after a -0.2% MoM decline in February. On an annual basis, sales were only up 2.9% YoY. The decline was heavily impacted by contractions in both vehicle and gas station sales. Ex-motor vehicle and gas sales were down at a softer rate of -0.3% MoM and had an improved year-over-year gain of 6.0% YoY. The dismal results were impacted by fewer purchases of big-ticket items like electronics (sales down-2.1% MoM), furniture (sales down -1.2% MoM), and building materials (sales down -2.1% MoM). Each of these categories is now down on a year-over-year basis, including a sharp -10.3% YoY decline in electronics sales (the lowest since 2009 when excluding the pandemic period). Higher interest rates are clearly impacting consumers’ confidence in purchasing expensive items and limiting the ability to easily access or afford credit.

If there were sharp declines in these categories, then where were the gains? The main source of growth came from the sales of nonstore retailers which increased 1.9% MoM in March and are up 12.3% YoY. The increase in this segment represents a jump of over $2 billion in sales which offsets the declines in furniture, electronics, and building materials on the month. Additionally, there was an improvement, albeit slight, in other non-durable and services segments including sporting goods & hobby sales (up 0.2% MoM), health & personal sales (0.3% MoM), and food & drinking services (0.1% MoM). These might include more of your day-to-day purchases that don’t take a chunk out of finances when purchased and, most likely, consumers would not need to access credit when shopping for items in these segments.
Durable goods purchases tend to take the lead in indicating where the economy is going. Purchases for these types of goods are the first to decline when a recession is on the horizon as consumers start to consider their finances more and tighten their purse strings. This is especially true if they don’t have access to easy credit. Interest rates on credit card plans at commercial banks are up to 20.1% as of February 2023, just before the pandemic, this averaged around 15%. We should be set for more declines in sales going forward as rates will probably stay high for the rest of the year, and savings and checkings accounts are still recovering from inflation.