Still Extremely Strong

• Retail sales were flat in April from March. Results were mixed across segments.
• Sales growth in March was revised higher to 11%, the second-largest gain on record.
• Consumer spending will support continued economic recovery in 2021, thanks to vaccinations and stimulus payments. Spending growth will shift from goods to services as the economy continues to reopen.

Retail sales were unchanged from March to April, according to the Census Bureau. This followed a huge 10.7% jump in March from February, revised up from the initially reported 9.8% increase. Consumer spending has surged in 2021 thanks to vaccines and stimulus payments and will power a strong economic recovery this year.

Sales excluding motor vehicles and parts fell 0.8% in April, and sales excluding autos and gasoline were also down 0.8%. Control sales-sales excluding autos, gasoline, food service, and building materials, and which go into nominal consumer spending in GDP-fell 1.5% over the month.

Results were mixed across segments. Sales of motor vehicles and parts rose 3% in April, in part because of higher vehicle prices. Gasoline sales fell 1% as gas prices declined. Sales at restaurants and bars rose 3% as more people felt comfortable going out; that followed a better than 13% monthly increase in March. Sales at department stores were down 5%, as were sales at clothing stores. Sales at electronics and appliances stores were up 1%, while sales at furniture stores were down a little less than 1%. Non-store sales, primarily online sales, fell 0.6% over the month.

Retail sales surged 11% in March; this was the second-strongest gain ever, behind only May 2020 when businesses started to reopen after the first wave of business closures from the pandemic. Stimulus checks from the federal government and vaccinations powered the big gain in March; there was a huge 21% increase in after-tax income in March. Shoppers took a breather in April, with sales flat over the month, but April retail sales were far above their levels earlier in 2021. Consumers continued to increase their purchases of big-ticket items in April-cars, and appliances-but cut back on some other purchases after stocking up in March.

Retail sales growth will be solid through the rest of this year. Consumers have billions of dollars of stimulus payments saved up, and will gradually spend those funds over the next couple of years. Because of the pandemic spending growth over the past year has been concentrated on goods, rather than services. However, that will shift as consumers have already purchased lots of goods and have been less willing or able to purchase services. Now, with more vaccinations and states lifting restrictions, households will be looking to dine out; travel; and go to movies, concerts, and sporting events. Supply chain disruptions that are limiting supplies of some items will also constrain goods purchases in the near term.

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.