U.S. shoppers stepped up their shopping last month, fueled by a spending spree on big ticket items from gadgets to cars before President Donald Trump’s expansive new tariffs started kicking in.
Retail sales rose 1.4% in March, after rising 0.2% in February, according to the Commerce Department. Retail sales fell 1.2% in January, hurt in part by cold weather that kept more Americans indoors, denting sales at car dealers and most other stores.
Excluding sales at dealers of autos and parts, sales only rose 0.5% in March, compared with the previous month.
Sales at dealers of autos and parts rose 5.3%, and the report also underscored strength elsewhere. Electronics retailers had a 0.8% increase while sporting goods retailers enjoyed a 2.4% gain. Grocery stores saw a 0.1% increase, and clothing and accessories stores had a 0.4% increase. Online retailers posted a 0.1% gai,n and restaurants had a 1.8% increase. However, furniture and home furnishings stores posted a 0.7% decline.
“These are simply blow-out numbers on March retail sales where the rush is on, like this is one gigantic clearance sale,” said Christopher S. Rupkey, chief economist at FWDBonds LLC, in a published note. Consumers are expecting sharply higher prices the next year and are clearing the store shelves and picking up bargains while they can. ”
Analysts expect that sales will start falling off as the slew of tariffs increase costs for companies and many retailers are forced to raise prices, hurting shopper demand. Consumers’ confidence has already taken a hit. And a growing number of retailers and suppliers are halting shipments from China as well as pausing orders as they wait to see where the tariffs settle. In some cases, they are canceling orders.
The result of the trade wars so far: a baseline tariff on most countries of 10%, with imports from China getting taxed at a combined 145%. Goods from Canada and Mexico face tariffs of up to 25%, while imported autos, steel and aluminum are taxed at that same rate. China retaliated last week with a 125% tariff on U.S. goods.
Early this month, Trump announced sweeping and steep tariffs on nearly all trading partners. But after Trump’s U- turn last week that paused the new tariffs on about 60 nations for 90 days, average U.S. duties remain much higher than a couple of months ago.
Last Friday, the Trump administration announced tariff exemptions on electronics like smartphones and laptops, but a few days later said they’re only a temporary reprieve.
Amid lots of uncertainty, U.S. consumer sentiment plunged in April, the fourth consecutive month of drops, in a seemingly sharp disapproval of Trump’s trade wars that have fueled anxiety over possible job cuts and rising inflation.
The preliminary reading of the University of Michigan’s closely watched consumer sentiment index, released Friday, fell 11% every month to 50.8, the lowest since the depths of the COVID-19 pandemic.
Ryan Petersen, CEO of Flexport, a global logistics company based in San Francisco, said that he has seen that the companies that he works with have already raised prices by 5% to 10%.
“We’re going to see it likely play out even more because these tariffs haven’t even washed through the system yet, “ he said. ”So once the goods arrive, paying the higher duties, people have no choice but to raise prices to accommodate for that.”
He added that it’s become hard for companies to make investments and set up a supply network.
“It could all just change in an instant,” he said. “This is not how business works. We need more certainty before we can invest.”
Analysts say that the big retailers will be able to navigate better than the smaller ones, which don’t have the clout to absorb extra costs or pressure their suppliers. But it also depends on the type of goods they sell, particularly if they have goods sources from overseas.
Ashley Hetrick, principal and sourcing and supply chain segment leader at accounting firm BDO, noted that stores are taking a “wait and see” approach when it comes to ordering goods and are more cautious about ordering seasonal items because they have a shorter shelf life. She said that the cancelling of orders hasn’t been widespread.
Walmart executives offered a dose of confidence last week that the retailer will keep delivering low prices as it navigates Trump’s escalating trade wars with China.
But the nation’s largest retailer, whose competitive prices became a strong magnet for inflation-weary shoppers, told analysts that it’s still vulnerable to the challenges and is monitoring the fluid tariff situation. The company told analysts that sales have been volatile.
“While in the short term, we’re not immune to the effects, we are positioned to play offense,” Walmart’s CEO Doug McMillon said at an investor meeting.
Amazon’s CEO, Andy Jassy, said last week that the company has been doing everything it can to keep prices low for customers, including bringing in goods early ahead of the barrage of tariffs and negotiating with suppliers.
But Jassy told CNBC’s Andrew Sorkin Thursday that its network of third-party sellers will have to pass on the higher costs to sellers.
Jassy said that he hadn’t seen a notable change in consumer behavior since Trump’s sweeping tariffs. And while he sees that some shoppers are stocking up ahead of price increases, the data is limited and he was not sure how broad-based that behavior is.
But according to Bloomreach, which tracks sales from more than 1,000 global brands and retailers overall, North American e-commerce revenue marginally increased 0.4% during the week of March 31 compared with the first week of March. But sales increased 6% between the week of March 24 and the week of March 31.
Online sales in apparel increased 44.8% during the week of March 31 compared with the first week of March, according to Bloomreach.
US factory output rose at a modest pace in March, a month ahead of President Donald Trump’s announcement of more sweeping tariffs that pose at least a short-term risk for manufacturers.
The 0.3% increase in manufacturing production followed a revised 1% February gain that was fueled by a surge in motor vehicle assemblies, the Federal Reserve said Wednesday. Excluding autos, factory output also rose 0.3% in March.
Overall industrial production fell for the first time in four months. Output at utilities declined on warmer weather, while mining and energy extraction rose.
US Factory Production Increases Ahead of Tariffs
Overall, industrial production fell in utilities.
Source: Federal Reserve
Manufacturing output increased a solid 5.1% in the first quarter — the most since late 2021 — as many customers boosted orders before the brunt of the tariffs hikes went into place.
However, that was before Trump announced on April 2 expansive reciprocal tariffs on US trading partners while also raising duties on most Chinese-made goods in multiple steps. In March, higher taxes on imported steel and aluminum went into effect.
Other manufacturing headwinds include higher costs for some materials as well as the general uncertainty tied to Trump’s uneven implementation of his trade policy that’s made navigating supply chains more challenging. While several businesses have announced plans for production facilities in the US, many are also tabling investment plans until the US reaches bilateral trade deals and there’s more clarity on tax policy.
| Metric | Actual | Estimate |
|---|---|---|
| Industrial production (MoM) | -0.3% | -0.2% |
| Manufacturing output (MoM) | +0.3% | +0.2% |
The gain in March manufacturing reflected a second monthly increase in motor vehicle and parts output and a pickup in aerospace equipment production, according to the Fed.
By market group, production of business and military equipment as well as construction supplies climbed, while the output of consumer goods fell on energy.
The Fed’s report showed capacity utilization at factories, a measure of potential output being used, edged up to 77.3%. The overall industrial utilization rate fell to 77.8%.
Other manufacturing reports are showing weakness in the sector. US factory activity contracted in Institute for Supply Management data earlier this month and prices accelerated sharply amid expectations for slower economic growth.
Earlier on Thursday, government figures showed retail sales strengthened at the end of the first quarter. Sales increased 1.4%, the largest advance since early 2023, and were powered by a surge in motor vehicle purchases as consumers front-loaded purchases ahead of tariffs.
