skip navigation

Stay up to date on timely topics and market events. Subscribe to our Blog now.

15 April 2021

Retail Sales Put on a Show in March

By Michael J. Bazdarich, PhD

Stay up to date on timely topics and market events. Subscribe to our Blog now.

Retail sales rose strongly in March, with the headline sales statistic up 9.8% on top of a +0.3% revision to the February sales estimate. We and most Wall Street analysts track a “control” measure of retail sales that excludes vehicle dealers, building material stores, service stations and restaurants (these sectors being especially volatile and also exhibiting substantial patronage from businesses as well as consumers). That control measure was up 6.9% with a +0.1% revision to February, not as strong as the headline numbers, but still a very strong gain.

As you can see from the accompanying chart, control sales have been all over the place since September, showing declines in 4Q, a sharp gain in January, a sharp decline in February and then the strong March gains. The consensus story is that the weak months reflect the waning of government stimulus checks as well as February blizzards in Texas, while the strong gains reflect the mailing of stimulus checks and a March Texas thaw. Our own explanation leans more on volatile seasonal swings around this time of year (pre- and post-Christmas swings in sales) and the disruption of “normal” seasonal patterns by the Covid pandemic.

We’ll stipulate for the record that no, even with full cognizance of the seasonal vagaries, we would not have predicted a 6.9% jump in March control sales nor the 9.8% rise in headline sales. Still, as you can see in the 12-month average shown in the chart (green line), averaging ups and downs together produces a relatively steady trend path. That is, neither the months of decline nor those of jump-back seriously disrupt the underlying trend path in place since most of the retail sector reopened in May 2020. So, we will continue to question whether retail activity has really been as erratic—and policy-driven—in recent months as the “raw” data suggest or whether what’s really going on is merely an inability of government methods to accurately seasonally adjust the data in these volatile conditions.

Exhibit 1: Retail Sales Trends
Explore Retail Sales Trends.
Source: Census Bureau. As of 31 Mar 21. Select the image to expand the view.
"Control" retail sales is total sales less vehicle dealers, service stations, building materials stores and restaurants sales.

If our story is right, then sales volatility should decline in coming months, now that both Christmas and Easter holidays are behind us. We also would expect some slowing in sales growth—possibly even declines in reported sales—as stimulus checks are banked rather than spent and as sales levels return to more sustainable levels now that households have largely offset the abstinence imposed by last year’s shutdown.

Within store types, car dealers and (reopening) restaurants led the way, with March sales gains of 15.5% and 13.3%, respectively (and these sectors also accounting for most of the revision to February headline data). Also registering especially strong gains were books and hobby stores, appliance stores, building materials stores, department stores and gas stations. Notably absent from the “up sharply” group were sales at online retailers, clothing stores and grocery stores. These last three sectors weren’t weak in March, but neither were their gains as noteworthy as those of the other store types.

© Western Asset Management Company, LLC 2024. The information contained in these materials ("the materials") is intended for the exclusive use of the designated recipient ("the recipient"). This information is proprietary and confidential and may contain commercially sensitive information, and may not be copied, reproduced or republished, in whole or in part, without the prior written consent of Western Asset Management Company ("Western Asset").
Past performance does not predict future returns. These materials should not be deemed to be a prediction or projection of future performance. These materials are intended for investment professionals including professional clients, eligible counterparties, and qualified investors only.
These materials have been produced for illustrative and informational purposes only. These materials contain Western Asset's opinions and beliefs as of the date designated on the materials; these views are subject to change and may not reflect real-time market developments and investment views.
Third party data may be used throughout the materials, and this data is believed to be accurate to the best of Western Asset's knowledge at the time of publication, but cannot be guaranteed. These materials may also contain strategy or product awards or rankings from independent third parties or industry publications which are based on unbiased quantitative and/or qualitative information determined independently by each third party or publication. In some cases, Western Asset may subscribe to these third party's standard industry services or publications. These standard subscriptions and services are available to all asset managers and do not influence rankings or awards in any way.
Investment strategies or products discussed herein may involve a high degree of risk, including the loss of some or all capital. Investments in any products or strategies described in these materials may be volatile, and investors should have the financial ability and willingness to accept such risks.
Unless otherwise noted, investment performance contained in these materials is reflective of a strategy composite. All other strategy data and information included in these materials reflects a representative portfolio which is an account in the composite that Western Asset believes most closely reflects the current portfolio management style of the strategy. Performance is not a consideration in the selection of the representative portfolio. The characteristics of the representative portfolio shown may differ from other accounts in the composite. Information regarding the representative portfolio and the other accounts in the composite are available upon request. Statements in these materials should not be considered investment advice. References, either general or specific, to securities and/or issuers in the materials are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendation to purchase or sell such securities. Employees and/or clients of Western Asset may have a position in the securities or issuers mentioned.
These materials are not intended to provide, and should not be relied on for, accounting, legal, tax, investment or other advice. The recipient should consult its own counsel, accountant, investment, tax, and any other advisers for this advice, including economic risks and merits, related to making an investment with Western Asset. The recipient is responsible for observing the applicable laws and regulations of their country of residence.
Founded in 1971, Western Asset Management Company is a global fixed-income investment manager with offices in Pasadena, New York, London, Singapore, Tokyo, Melbourne, São Paulo, Hong Kong, and Zürich. Western Asset is a wholly owned subsidiary of Franklin Resources, Inc. but operates autonomously. Western Asset is comprised of six legal entities across the globe, each with distinct regional registrations: Western Asset Management Company, LLC, a registered Investment Adviser with the Securities and Exchange Commission; Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorized and regulated by Comissão de Valores Mobiliários and Brazilian Central Bank; Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services License 303160; Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services License for fund management and regulated by the Monetary Authority of Singapore; Western Asset Management Company Ltd, a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan; and Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority ("FCA") (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.