While U.S. consumers may have spent slightly more than expected last month, it was because they paid more for necessities like gasoline and food, and not because they bought more discretionary items, analysts said on Monday.
The Commerce Department said U.S. retail sales were up 0.2 percent in March, slightly stronger than expected.
But Americans are not shopping the way they used to, according to Bespoke Investment Group, a research firm in Harrison, N.Y.
They’re digging deeper into their wallets for the bare necessities like gasoline, food and beverages, the sectors showing the most growth in retail sales, it said. That trend has been building over the last several months,
“Unfortunately, growth in these sectors is primarily due to inflation in food and energy prices,” Bespoke’s Paul Hickey and Justin Walters said.
The sectors selling discretionary items, like motor vehicles, building materials, general merchandise and clothing, showed the largest contraction of total share, they said.
Prices are surging at a time when U.S. home prices continue to fall and the labor market shows signs of softening.
Federal Reserve Chairman Ben Bernanke said as much earlier this year, acknowledging that the central bank’s job is even more difficult, especially compared with the last recession in 2001, when the tech-stock bubble burst and investment declined.
“In this case, the consumer is taking the brunt of the effects” of the current downturn because housing wealth has been tied strongly to spending and Americans’ homes are their biggest assets, Bernanke said.
David Rosenberg, North American economist at Merrill Lynch, said on Monday the 64-quarter-old consumer spending boom came to an end in the first quarter of this year.
“The retrenchment has been broadly based across hotels, clothing, autos, airlines, jewelry, appliances, restaurants, sporting goods, casinos and home improvement,” Rosenberg said in a report titled “Will you still need me, will you still feed me, when I’m 64?”
Bespoke’s Hickey and Walters said food and beverage stores contributed 12.88 percent to the overall headline number in March retail sales, while gas stations contributed 10.63 percent of sales. Both categories were up from one year ago, when food contributed 12.59 percent and gas 9.11 percent.