Retail sales in the United States jumped 1.4% in March, the largest monthly gain since January 2023, as consumers rushed to purchase cars and other big-ticket items ahead of President Donald Trump's sweeping tariff increases. The Commerce Department said Wednesday the surge was led by a 5.3% rise in spending on vehicles and auto parts, outpacing broader retail activity.
The spike in car sales reflects a wave of consumer anticipation that prices will rise in the months ahead. Trump's new 25% tariffs on imported automobiles began rolling out in early April. Many automakers offered incentives to clear out inventory before the tariffs hit, leading to what Cox Automotive called the "hottest" new car sales month in four years.
Retail activity was strong across other discretionary categories as well. Sales at home improvement stores rose 3.3%, and restaurants and bars posted a 1.8% gain. Sporting goods and gardening supply stores also reported increases. However, furniture retailers, department stores, and gas stations recorded declines.
"Consumers are expecting sharply higher prices the next year and are clearing the store shelves and picking up bargains while they can," said Christopher Rupkey, chief economist at FwdBonds.
Excluding automobiles, retail sales rose a more modest 0.5%. From a year earlier, total sales were up 4.6%, highlighting the strength of consumer demand despite growing economic unease.
March's jump in retail sales stands in contrast to February's weak 0.2% gain and January's decline, reflecting a temporary rush that economists expect will fade as tariffs take effect. "In the near term, we could have some really strong consumer spending numbers, but that just makes things a little bit tricky for the Fed," said James Knightley, chief international economist at ING.
The University of Michigan's consumer sentiment index recorded a sharp decline in expectations for the economy's future, fueled by inflation worries stemming from Trump's trade agenda. A recent survey found widespread concern about how higher tariffs will drive up prices and potentially lead to job losses.
Trump's trade policy has included a 10% universal tariff on all imports, a 145% duty on Chinese goods, and 25% tariffs on aluminum, steel, and vehicles. Additional levies on sectors such as semiconductors and pharmaceuticals are under review. A broader package of tariff hikes, briefly enacted on April 9, was postponed until July, adding to the policy uncertainty.
Chicago Federal Reserve President Austan Goolsbee warned that the economy could face a "stagflationary shock." "A tariff is like a negative supply shock," he said at a recent event in New York. "Prices are going up while jobs are being lost and growth is coming down, and there is not a generic playbook for how the central bank should respond."
