Retail sales increased 0.4% in April from March, slightly weaker than the consensus expectation for a 0.5% increase. Sales were up 0.4% excluding motor vehicles and parts, and up 0.5% excluding autos, parts, and gasoline. Control sales-sales excluding autos, parts, gasoline, restaurants, and building materials, and which go into nominal consumer spending in GDP-rose 0.6% in April. 

On a year-ago basis, overall retail sales growth was 1.6% in April, although growth was 2.1% excluding autos and parts, and 4.3% excluding autos, parts, and gasoline. Control sales were up 4.2% year-over-year in April, down from 6.5% growth at the end of 2022.

There was a downward revision to retail sales in March, with sales dropping 0.7% over the month, instead of the initially reported 0.6% decline. Sales also fell 0.7% in February but jumped 2.8% in January. So far in 2023, sales are running close to their levels at the end of last year. Consumer spending growth is softening due to several drags. 

Inflation has been a weight on household spending and slowing inflation this year is weighing on the nominal value of retail sales. Other headwinds include softening but solid job and wage gains, higher interest rates, declining household wealth due to falling home values and stock prices, and a weakening in home-related purchases as the housing market contracts. In addition, consumers bought a lot of goods in the early stages of the pandemic recovery, leaving less need to purchase goods now. 

PNC expects retail sales growth to slow further in the near term as the labor market continues to soften and as interest rates remain elevated, and then decline later this year as the U.S. economy enters into a mild recession. Retail sales should pick up in 2024 as the Federal Reserve starts to cut interest rates and an economic recovery begins. 

Results were mixed across segments in April. Sales at gasoline stations fell 0.8% as gas prices declined, and sales were down more than 3% at specialty stores. There were also declines in furniture and home furnishings (down 0.7%), electronics and appliances (down 0.5%), clothing (down 0.3%), and food and beverages (down 0.2%). But restaurant sales growth was solid at 0.6%, and there were also increases for motor vehicles and parts (0.4%), building materials (0.5%), general merchandise (0.9%), and non-store merchandise (primarily online purchases, up 1.2%).

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance, and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.