Retail spending continues to defy gravity

Retailer Bottom Line: Despite higher gas prices and weaker sentiment, spending continued to show solid growth as consumers benefited from increased tax refunds in March.

Retail sales grew for a sixth consecutive month in March despite increased gasoline prices, according to the CNBC/NRF Retail Monitor, powered by Affinity Solutions. 

While consumers are clearly worried about higher prices at the pump and the broader impact of oil prices on the economy, we continue to see them exhibit a “gripe but swipe” mentality when it comes to spending on retail goods.

The Retail Monitor calculation of core retail sales (excluding restaurants in addition to auto dealers and gas stations) was up 0.41% month over month in March and up 7.05% year over year. Spending on discretionary categories led the way: Sales at clothing and accessories stores increased 0.57% over the previous month while sales at health and personal care stores rose 0.51%. 

Sporting goods, hobby, music and bookstores were also among the top gainers, with an increase of 0.4% over February. 

Generally speaking, discretionary goods tend to see a boost when consumers are feeling well off. How do we reconcile this outperformance with poor sentiment and higher prices? 

Consumers benefited from higher tax refunds to the tune of over $20 billion in March. So far this year, U.S. taxpayers have netted an excess $35 billion dollars in tax refunds versus last year, on their way to what looks like a windfall of around $50 billion over the course of 2026. So, despite higher gas prices costing the average consumer around $15 to $20 a month, they were more than offset by higher returns. 

We’ll see those refunds begin to taper off after April 15, so the longevity of the Middle East conflict will be critical in terms of whether we continue to see continued outperformance in retail sales in the coming months.