Seasonally adjusted retail sales decreased by 1.0% in March, after retail sales for February were revised higher. The Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $691.7 billion during the month, which was down by 1.0 percent (±0.5%) from February's revised sales of $698.6 billion, but still 2.9 percent (±0.7 percent) above the adjusted sales in March of last year.  February's seasonally adjusted sales were revised from $697.9 billion to $698.6 billion, while January's sales were revised from $700.7 billion to $700.1 billion; as a result, the percent change from January to February was revised from down 0.4 percent (±0.5 percent)* to down 0.2 percent (±0.1 percent). Estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated March sales actually rose 14.5%, from $614,327 million in February to $703,200 million in March, while they were up 3.1% from the $681,854 million of sales in March of a year ago...

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the March Census Marts pdf.. The first double column of this table shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month's March "advance" report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column. The second double column pair below gives us the revision of the February advance estimates (now called "preliminary") as of this report, with the new January to February percentage change under "Jan 2023 r" (revised) and the February 2022 to February 2023 percentage change as revised in the 2nd column of that pair...(for your reference, our copy of this same table from the advance February estimate, before this month's revisions, is here).... Lastly, the third pair of columns shows the percentage change of the first 3 months of this year's sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of the 1st quarter of a year ago..As you can see from that fifth column, overall retail sales for the 1st quarter of 2023 were roughly 1.7% higher than the 4th quarter of 2021, which implies that nominal personal consumption of goods for the 1st quarter will be up by roughly the same amount, before any inflation adjustments…

To compute March's real personal consumption of goods data for national accounts from this March retail sales report, the BEA will use the corresponding price changes from the March consumer price index, which we reviewed here.. To estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals...from the third line on the above table, we can see that March retail sales excluding the 5.5% price-related decrease in sales at gas stations were down by 0.6%.. Then, by subtracting the dollar values representing the 0.1% decrease in grocery & beverage sales and the 0.1% increase in food services sales out from that total, we find that core retail sales were down by roughly 0.8% for the month. Since the March CPI report showed that the the composite price index of all goods less food and energy goods was 0.2% higher in March, we can thus figure that real retail sales excluding food and energy decreased around 1.0%.  However, the actual adjustment in national accounts for each of the types of sales shown above will vary by the change in the related price index.  For instance, while nominal sales at clothing stores were 1.7% lower in March, the apparel price index was 0.3% higher, which means that real sales of clothing likely fell around 2.0%... similarly, while sales at health and personal care stores were 0.3% higher, the price index for medical care commodities was 0.6% higher, which suggests real sales of drugs and health products were down by around 0.3%....

In addition to figuring those core retail sales, we should also adjust food and energy retail sales for their price changes separately, just as the BEA will do. The March CPI report showed that the food price index was unchanged, as the price index for food purchased for use at home fell 0.3% while the index for food bought away from home was 0.6% higher, as prices at fast food outlets rose 0.5% while prices at full service restaurants rose 0.7%  Hence, while nominal sales at food and beverage stores were 0.1% lower, real sales of food and beverages would be around 0.2% higher in light of the 0.3% lower prices.  On the other hand, the 0.1% increase in nominal sales at bars and restaurants, once adjusted for 0.6% higher prices, suggests that real sales at bars and restaurants fell around 0.5% during the month. And while sales at gas stations were down 5.5%, there was a 4.6% decrease in price of gasoline during the month, which would suggest that real sales of gasoline were down on the order of 0.9%, with a caveat that gasoline stations do sell more than gasoline, products which should not be adjusted with gasoline prices, so the actual decrease in real sales at gas stations was likely smaller. Reweighing and averaging the real sales changes that we have thus estimated back together, and excluding food services, we can then estimate that the income and outlays report for March will show that real personal consumption of goods fell by around 0.8% in March, after rising by a revised 0.1% in February and by a revised 2.9% in January.  At the same time, the 0.5% decrease in real sales at bars and restaurants would reduce March real personal consumption of services by a small fraction of a percent...

Now that we have estimates of the percentage change in real PCE goods for all three months of the first quarter, we can also estimate the contribution that real PCE goods will make to 1st quarter GDP.. The February income and outlays report gives the change in real PCE goods for the 4th quarter months as up 0.8% in October, down 1.3% in November, and down 0.7% in December.  Based on the revisions to retail sales in the March retail report, we now estimate real PCE goods for January at +2.9%, PCE goods for February at +0.1%, and PCE goods for March at -0.8%. To simplify our calculations, we’ll now convert those percentage changes in PCE goods into an index, and set October with an index value of 100.00.  Thus Nov = 98.70, Dec = 98.01, Jan = 100.85, Feb = 100.95, and March = 100.14…hence, to estimate the growth rate of 1st quarter PCE goods, we have this calculation (((100.85 + 100.95 + 100.14) / 3) / ((100.00+ 98.70+ 98.01)/ 3)) ^ 4 = 1.07239.  That means that PCE goods rose at about a 7.24% annual rate in the 1st quarter.  Since PCE goods has usually been around 23% of GDP, that means that the contribution of PCE goods to first quarter GDP should be around 1.67 percentage points…

Note: the above was first published as part of my weekly synopsis at MarketWatch 666.