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Growth of U.S. retail sales continued to slow on an annual basis in April, as more signs of a consumer slowdown reared their head. But there was a bright spot for digital businesses: The category that includes ecommerce markedly outpaced wider retail.
Data from the U.S. Commerce Department for April 2023 showed the following:
Total retail sales were $686.1 billion, up 0.4% from March 2023. This reversed a trend of declining monthly sales that was observed over the last two months.
On an annual basis, retail sales grew 1.6% from April 2022.
Core retail sales, as measured by the National Retail Federation, rose 2% year-over-year. This measure strips out auto and restaurants.
Nonstore retailers, which includes ecommerce sales, grew 8% year-over-year.
What’s driving these numbers?
On a category level, a bifurcation is continuing to emerge between discretionary and essential categories.
There were annual declines in sales at furniture stores (-6.4%), electronics and appliance stores (-7.3%) sporting goods and hobby stores (-5.4%) and clothing stores (-2.3%).
Meanwhile, notable gains were made at health and personal care stores (+7.9%) and grocery stores (+3.7).
It’s the latest sign that consumers are tightening after months of rapidly rising prices, and increased interest rates that are starting to impact demand in key consumer spending drivers such as housing. Savings, which were robust during the pandemic, could also be in shorter supply. The retail sales data comes a day after the New York Fed reported that household debt surpassed $17 trillion for the first time in the first quarter.
NRF Chief Economist Jack Kleinhenz said that the slowing year-over-year growth came "partly because of upward revisions to last year’s data but also an early indication that credit conditions are tightening and excess savings are shrinking.” It was also driven in part by a massive 14.6% decline in gas station sales due to falling prices. As a result, April’s overall annual retail growth looks better when stripping away gas and motor vehicle-related retailers, for a growth rate of 4.3%. But that still remains more tepid than the high-single-digit range that was observed for much of 2022.
“While any growth is welcome, this was the shallowest increase in 31 months and marks a very significant deterioration compared to recent performance,” said GlobalData Managing Director Neil Saunders. “The earlier timing of Easter compared to last year may certainly have pushed a bit of spending from April into March, but the broader evidence suggests that a consumer slowdown is now firmly underway.”
Trending in Economy
Labor disputes on the West Coast could cause further disruption heading into peak season.
When the first half of 2023 is complete, imports are expected to dip 22% below last year.
That’s according to new data from the Global Port Tracker, which is compiled monthly by the National Retail Federation and Hackett Associates.
The decline has been building over the entire year, as imports dipped in the winter. With the spring, volume started to rebound. In April, the major ports handled 1.78 million Twenty-Foot Equivalent Units. That was an increase of 9.6% from March. Still it was a decline of 21.3% year over year – reflecting the record cargo hauled in over the spike in consumer demand of 2021 and the inventory glut 2022.
In 2023, consumer spending is remaining resilient with in a strong job market, despite the collision of inflation and interest rates. The economy remains different from pre-pandemic days, but shipping volumes are beginning to once again resemble the time before COVID-19.
“Economists and shipping lines increasingly wonder why the decline in container import demand is so much at odds with continuous growth in consumer demand,” said Hackett Associates Founder Ben Hackett, in a statement. “Import container shipments have returned the pre-pandemic levels seen in 2019 and appear likely to stay there for a while.”
Retailers and logistics professionals alike are looking to the second half of the year for a potential upswing. Peak shipping season occurs in the summer, which is in preparation for peak shopping season over the holidays.
Yet disruption could occur on the West Coast if labor issues can’t be settled. This week, ports from Los Angeles to Seattle reported closures and slowdowns as ongoing union disputes boil over, CNBC reported. NRF called on the Biden administration to intervene.
“Cargo volume is lower than last year but retailers are entering the busiest shipping season of the year bringing in holiday merchandise. The last thing retailers and other shippers need is ongoing disruption at the ports,” aid NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “If labor and management can’t reach agreement and operate smoothly and efficiently, retailers will have no choice but to continue to take their cargo to East Coast and Gulf Coast gateways. We continue to urge the administration to step in and help the parties reach an agreement and end the disruptions so operations can return to normal. We’ve had enough unavoidable supply chain issues the past two years. This is not the time for one that can be avoided.”