Retail sales post biggest jump in more than 3 years on record spike in gas prices

By Alicia Wallace, CNN

(CNN) — Americans saw large chunks of their wallets get eaten up by soaring gas prices in March; however, consumers still had money left in the tank to spend elsewhere.

A war-driven spike in gas prices sent US retail sales 1.7% higher March, the fastest monthly pace in more than three years, according to Commerce Department data released Tuesday.

The March sales pace was a sharp upswing from a 0.7% gain in February.

Retail sales figures are adjusted for seasonal swings but not inflation, which shot higher in March by 0.9% (triple the February rate), the latest Consumer Price Index showed.

Gas prices soared last month as a result of the war with Iran and the effective closure of the Strait of Hormuz, a critical channel for the transport of a fifth of the world’s oil. Economists had factored that boost into their estimates for a 1.6% monthly hike.

Pricey fuel played an outsized role in Tuesday’s report. Sales at gasoline stations jolted higher in March by 15.5% from the month before.

When excluding gas stations, retail sales rose 0.6% last month, a touch slower than the 0.7% increase seen in February for that comparable category.

Those spending gains were broad-based and even strong in some cases: Furniture and home furnishings store sales, for example, were up 2.2%.

Spending in other discretionary areas, such as electronics and building materials, held up as well – indications of consumers’ willingness to spend as well as the influence of tax refunds, said Gary Schlossberg, global strategist at Wells Fargo Investment Institute.

“Pressure on household budgets is being cushioned, for now, by sizable increases in tax refunds tied to last year’s legislation,” Schlossberg wrote in commentary to investors on Tuesday.

High prices start to take their toll

Consumers cut back in other areas, however. Apparel sales were flat, and restaurant sales were up a meager 0.1%.

That’s likely an indication of some consumers shifting their behaviors because of high gas prices, said Dan North, Allianz Trade’s senior economist for North America.

“Gasoline is a thing you love to hate, because you have to buy it; there’s really no substitute,” he told CNN in an interview.

However, for some Americans – particularly lower-income households – gasoline accounts for a bigger share of the monthly budget, he said.

For those families, paying more for gas means having less money for discrentionary items, he said. “Are we going to go out to Chili’s tonight or stay home and make burgers? Well, for right now, we’re going to stay home.”

Savings, tax refunds, pay gains and credit cards are helping consumers weather the high gas prices and other costs; but those aren’t endless, North said.

Savings could get depleted, tax refunds peter out, pay gains could get overtaken by inflation and debt could become insurmountable.

The biggest question for the economy and the consumers who power it, he said, is how long is the war going to last?

“If we can wind this up, so to speak, in the next few months, the damage to the consumer and economy might not be so bad,” North said. “If you start stretching it out for months and months and toward the end of the year, then consumers and the rest of the economy get in trouble.”

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