Grocery sales growth tails off in March

Sales at grocery stores flattened in March as the U.S. retail sector saw sales dip sequentially for a second straight month.

March retail and foodservice sales totaled $691.67 billion (seasonally adjusted), down 1% from $698.57 billion in revised numbers for February but up 2.9% from March 2022, the U.S. Census Bureau reported in advance estimates on Friday.

Retail trade sales for March—excluding motor vehicles, parts stores, gas stations and repair shops—fell 1.2% month to month to $598.59 billion yet edged up 1.5% year over year.

March's retail sales result followed a 0.2% monthly decline and an annual increase of 5.9% in updated Census Bureau figures for February. That came after respective monthly and yearly gains of 3.2% and 5.9% in January. Revised retail trade sales data for February showed flat month-to-month results and a 4.5% uptick year over year in the wake of 2.9% monthly and 5.5% annual increases for January.

"The March retail sales report reflects a pullback in consumer spending from February. Despite moderating inflation, financial strain is still a top-of-mind issue for American consumers," Claire Tassin, retail and e-commerce analyst at data intelligence firm Morning Consult, said in an email. "One bright spot is in e-commerce, which is up 1.9% from February and 12.3% from one year ago. We know that shoppers are increasingly drawn to online channels, where it's easier to find deals and discounts."

Grocery store sales were essentially flat on a monthly basis in March, totaling $72.92 billion (seasonally adjusted) versus $72.89 billion in updated figures for February, which marked a 1% gain, the Census Bureau said. For the 12-month comparison, March grocery retail sales grew 5.3%, compared with an annual gain of 6.5% for February. In January, grocery store sales had inched up 0.1% month over month and climbed 6.6% year over year.

From: U.S. Census Bureau

Sales at all food and beverage stores for March were down 0.1% monthly to $81.27 billion but up 5% over 12 months. That compared with growth of 0.8% sequentially and 6.1% annually to $81.35 billion in February's revised data, the Census Bureau reported.

Naveen Jaggi, president of retail advisory services at commercial real estate firm Jones Lang LaSalle (JLL), noted the impact of declining prices—especially in food and fuel—on March retail sales. The March Consumer Price Index (CPI) rose just 0.1% month-to-month and 5% year over year—including a 0.3% decline in the food-at-home index, the first decrease since September 2020.

"The drop in February retail sales and easing price pressures offer preliminary signs of a cooling economy, leaving consumers optimistic about retail prices moving forward—just in time for summer plans, when consumers begin to travel more, shop for summer clothes, dine outside at restaurants and focus on experiences," according to Jaggi.

The National Retail Federation (NRF) on Friday reported a 0.5% monthly decrease (seasonally adjusted) for March retail sales yet a 4.6% year-over-year gain (unadjusted), compared with upticks of 0.5% monthly and 6.7% yearly in February.

NRF's estimate focuses on core retail, excluding automobile dealers, gas stations and restaurants. The retail trade group noted that its figures were up 6% unadjusted annually on a three-month moving average as of March.

From: National Retail Federation

"March spending reversed the strong pace of core retail sales we saw earlier this year," NRF Chief Economist Jack Kleinhenz said in a statement. "These results reflect both slower economic activity and lower prices because of easing inflation—which means fewer dollars spent even if consumers buy the same number of goods—but there is still a lot of spending in the economy. Keep in mind that households tend to shop less during the post-holiday season. In addition, tax refunds typically contribute to spending at this time of year but are smaller this year than last. Nonetheless, we are still looking at positive sales growth moving forward in 2023."

In late March, NRF forecast 2023 U.S. retail sales growth of 4% to 6%, reaching between $5.13 trillion and $5.23 trillion.

March sales fell on a monthly basis in six of nine retail categories tracked by NRF: grocery and beverage stores, general merchandise stores, furniture and home furnishings stores, apparel and accessories stores, building materials and garden supply stores, and electronics and appliance stores. Four retail segments turned in 12-month decreases, including furniture and home furnishings stores, apparel and accessories stores, building materials and garden supply stores, and electronics and appliance stores.

Grocery and beverage stores sales were down 0.1% month to month seasonally adjusted in March yet up 5.6% unadjusted over 12 months, according to NRF. Among other retail categories in the food, drug and mass channel, March sales edged up 0.3% month over month seasonally adjusted and 7.3% unadjusted year over year for health and personal care stores (including drugstores), while general merchandise stores saw sales decline 3% month over month seasonally adjusted but rise 2.9% unadjusted year over year.

"Retail sales moderated in March after posting strong gains in the first two months of the year," NRF President and CEO Matthew Shay commented. "Continued easing of inflation and the overall strength of the job market and wages are keeping the fundamentals of the consumer economy strong and should support their ability to spend on household priorities through 2023. Retailers recognize the pressure on consumers from increased prices in services and experiences, and the impact of higher interest rates, and are prioritizing product mix, competitive pricing and convenience to help consumers stretch their budgets."