March sees spike in US retail sales due to rising gasoline prices

• Global oil prices jumped over 30% due to the Iran conflict, adding an estimated $857 to Americans' average annual gasoline costs for the year
• Core retail sales (excluding autos, gas, building materials, and food services) rose 0.7%, suggesting consumer spending growth slowed from Q4's 1.9% annualized rate
• Consumer sentiment fell to a record low in April amid concerns that high gas prices could divert spending from other sectors and erode tax refunds

Summary

Key Development: U.S. retail sales surged 1.7% in March, exceeding the 1.4% forecast, driven primarily by elevated gasoline prices stemming from the U.S.-Israeli conflict with Iran.

Critical Data Points:

• Retail sales jumped 1.7% in March vs. 0.7% in February (revised up from 0.6%)
• Core retail sales (excluding autos, gas, building materials, and food services) rose 0.7%
• Global oil prices increased over 30% due to Iran conflict
• Retail gasoline prices soared 24.1% in March
• Average annual gasoline costs for Americans rose by $857
• Consumer sentiment fell to record lows in April

Market Drivers:

Tax refunds supported consumer spending, averaging $351 higher through March 27 compared to 2025, though below Treasury expectations of $1,000 increase. Auto sales contributed to gains, likely boosted by manufacturer incentives.

Economic Implications:

Economists warn that elevated fuel costs could divert spending from other retail segments and erode tax refund benefits. Consumer spending growth is expected to slow from Q4's 1.9% annualized rate, with the Atlanta Fed's GDPNow model projecting 1.3% growth for Q1, down from 0.5% in Q4.

Outlook Concerns:

The report reveals underlying weakness beyond energy-driven gains. While headline numbers beat expectations, record-low consumer sentiment and elevated gasoline prices pose risks to sustained consumption growth. The advance Q1 GDP estimate is scheduled for release next week, providing further clarity on economic momentum.

Sectors Affected: Retail, automotive, energy, and broader consumer discretionary spending.