United States: Higher Gasoline Prices Drive a Sharp Increase in Retail Sales

Retail sales recorded their strongest monthly increase since January 2023 in March. As expected, a very large share of the gain came from sales at gasoline stations, which surged by 15.5% during the month, reflecting higher gasoline prices.

Excluding gasoline, sales still increased by 0.6%, which exceeded our expectations. This suggests that higher gasoline prices have not significantly discouraged households from consuming other goods and services. Motor vehicle sales were also known to be rising again, although the March increase was more modest than the stronger gain recorded in February. Solid advances were also observed in furniture stores, electronics and appliance retailers, and especially department stores, whose sales tend to be highly volatile. However, stagnant sales at clothing retailers and leisure-related goods stores, along with weak growth in food services, provide some indication that more discretionary forms of consumption are under greater pressure. When adjusted for price fluctuations, real sales actually declined in all three of these retail categories, as well as in home improvement stores and in the “miscellaneous” category. Overall, real retail sales still increased by 0.4% in March, following a 0.5% rise in February.

Can retail sales and consumption maintain their momentum despite the shock from higher gasoline prices and the elevated cost of living? Some factors remain supportive. Household disposable income continues to be underpinned by a labour market that appears to have kept expanding since the onset of the war in Iran. Hiring rebounded in March, and weekly jobless claims as well as other surveys suggest that job creation has continued since then. In addition, the tax relief measures enacted last summer have translated into more generous tax refunds for households, running 17% above their level at the same point in 2025. That said, consumer confidence was tested in March and April by the crisis in the Persian Gulf. If this situation fails to be resolved in a credible and lasting manner, and if gasoline prices remain elevated, the resulting drag on confidence and real income will eventually weigh more heavily on consumption.

Although the increase in gasoline prices explains a very large portion of the gain, the robustness of retail sales in March is nevertheless encouraging. It represents another sign of the resilience of the US economy. Still, some signs of fragility will need to be monitored closely in the coming weeks, particularly if household confidence continues to erode. In the meantime, the overall economic backdrop and the potentially temporary nature of the inflationary shock suggest that Federal Reserve officials will opt for a status quo decision at their meeting next week.