U.S. retail sales rose by more than expected in March in the first gain in three months, suggesting consumer demand regained steam on the back of tax cuts and refunds.

Sales advanced 0.6 per cent following a 0.1 per cent drop in the previous month, according to Commerce Department figures released Monday. That compared with the median estimate of economists for a 0.4 per cent increase. So-called retail control- group sales, which are used to calculate gross domestic product and exclude food services, auto dealers, building-materials stores and gasoline stations, gained 0.4 per cent, matching estimates.

The improvement in demand went beyond a bump in auto sales, as consumers went shopping at furniture and home stores along with electronics and appliance sellers. The results underscore that the declines from December to February were more of a pause following a post-hurricane spending binge. That supports the Federal Reserve’s view that such weakness was transitory, as well as the central bank’s outlook for two or three more interest-rate increases this year following a quarter-point hike in March.

Eight of 13 major retail categories showed increases. Sales at health and personal-care stores rose 1.4 per cent, the most in two years. Auto sales rose 2 per cent, the most since September; a report last week showed purchases of cars and light trucks rose to a 17.4 million annualized rate in March, the fastest this year.

Weaker categories included building-materials stores, which fell 0.6 per cent; apparel-store sales, down 0.8 percent; and sporting goods, hobby, book and music stores, which declined 1.8 percent, the most since December, the data showed.


Consumer optimism has held at relatively high levels thanks to factors including job-market strength, rising wages and lower taxes. Refunds from 2017 returns may have also given retail sales a boost in March.

Even with the bounceback, consumer spending probably expanded at a slower pace in the first quarter. Control-group sales rose at a 1 per cent annualized rate over the last three months, compared with 7.6 per cent in the three months through December.

The relatively weak spending has kept estimates for economic growth in check, with analysts forecasting before Monday’s report that gross domestic product expanded at a 2.2 per cent annualized pace in the January-March period, down from 2.9 per cent in the previous quarter.

The data on Monday also showed that a decline in gasoline costs, as reported last week in the Labor Department’s consumer price index, may have weighed on filling-station receipts. Gas-station sales dropped 0.3 per cent, the most since July, according to the Commerce report. Excluding automobiles and gasoline, sales advanced 0.3 per cent for a second month.