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By Matt Harris, CFA
Senior Portfolio Advisor
HilltopSecurities Asset Management
Today the U.S. Census Bureau reported stronger-than-expected retail sales for March, with headline sales rising 1.7% month over month, beating the 1.4% consensus estimate and marking the largest monthly gain in a year.
The major cause of the increase was higher gasoline prices. Spending at gas stations surged 15.5% month over month, reflecting a sharp rise in prices at the pump and providing a sizable bump to the overall headline figure.
More importantly, underlying demand also showed strength. The control group used directly in GDP calculations, rose 0.7%, well above the 0.2% expectation. This measure excludes autos, gasoline, building materials, and food services, which brings a tighter focus on consumer spending trends.
Some analysts noted that part of the strength in the report may be related to larger than usual tax refunds flowing into bank accounts during tax season, providing consumers with additional spending power.
Most categories were positive across the board. Of the 13 sectors, only one posted a decline, miscellaneous store retailers. These would be florists, pet stores, office supply stores. Furniture and home furnishings stores rose 2%, while nonstore (online) retailers increased 1%. The food services and drinking places category, the only services component within the retail report, rose a modest 0.1%, suggesting consumers remain somewhat cautious on discretionary services spending.
Adding to the positive report, January and February retail sales were both revised higher, improving the overall outlook for first quarter economic growth. Following this report, estimates for Q1 GDP are likely to improve. The Atlanta Fed’s GDPNow model currently projects 1.3% real GDP growth for the first quarter.
Altogether, the report points to stronger consumer demand even as higher gas prices absorb a larger share of household budgets. While it’s an encouraging report today, a sustained period of elevated fuel costs could eventually crowd out discretionary spending, particularly on services and non essential goods.
Elsewhere in the markets, Kevin Warsh’s confirmation hearings are set to begin today, though the nomination faces headwinds. Several Senate Democrats have already indicated opposition, and North Carolina Republican Sen. Thom Tillis is also expected to oppose the nomination as long as the Justice Department’s investigation involving the Federal Reserve remains ongoing.
About Scott McIntyre, CFA
As HilltopSecurities Asset Management’s Co-Head of Investment Management, Scott McIntyre specializes in investment management services and is responsible for the management, oversight and trade supervision of more than $30 billion in institutional fixed income assets for HilltopSecurities’ public sector municipal clients. Scott also provides investment advice and consulting, reviews local government investment policies, formulates overall investment strategies, evaluates account performance and oversees the day-to-day operations. He is a member of the Chartered Financial Analyst (CFA) Institute and a CFA Charterholder, a two-term advisor to the GFOA Treasury and Investment Management (TIM) committee, a Registered Investment Advisor, and holds FINRA Series 7, 24, 63, and 65 licenses.
About Greg Warner, CTP
As HilltopSecurities Asset Management’s Co-Head of Investment Management, Greg Warner specializes in investment management services and is responsible for the management and oversight of more than $30 billion in institutional fixed income assets for HilltopSecurities’ public sector municipal clients. Greg coordinates all client services and portfolio management duties, including security evaluation and portfolio analysis, trading, investment reporting, board presentations, and monitoring of broker-dealer relationships. He is an advisory committee member to the Texas Association of Counties, a member of the Government Treasurers’ Organization of Texas (GTOT), a Registered Investment Advisor, a Certified Treasury Professional (CTP) and holds FINRA Series 7, 63, and 65 licenses.
About Matt Harris, CFA
As HilltopSecurities Asset Management’s Senior Portfolio Advisor, Matt Harris specializes in investment management services for public sector municipal clients. He developed his experience in the banking industry, supporting balance sheet management, interest rate risk analysis, liquidity planning, and investment strategy implementation. At HilltopSecurities, he works closely with clients to develop and implement customized investment strategies, oversees account documentation and reporting, and assists clients with the public funds depository review process, including competitive RFP evaluations. Harris is a member of the CFA Institute and a CFA Charterholder, a Registered Investment Advisor, and holds FINRA Series 7, 63, and 66 licenses.
The paper/commentary was prepared by HilltopSecurities (HTS). It is intended for informational purposes only and does not constitute legal or investment advice, nor is it an offer or a solicitation of an offer to buy or sell any investment or other specific product. Information provided in this paper was obtained from sources that are believed to be reliable; however, it is not guaranteed to be correct, complete, or current, and is not intended to imply or establish standards of care applicable to any attorney or advisor in any particular circumstances. The statements within constitute the views of HTS as of the date of the document and may differ from the views of other divisions/departments of Hilltop Securities Inc. and its affiliates. In addition, the views are subject to change without notice. This paper represents historical information only and is not an indication of future performance. This material has not been prepared in accordance with the guidelines or requirements to promote investment research, it is not a research report and is not intended as such. Sources available upon request.
Hilltop Securities Inc. is a registered broker-dealer, registered investment adviser and municipal advisor firm that does not provide tax or legal advice. HTS is a wholly owned subsidiary of Hilltop Holdings, Inc. (NYSE: HTH) located at 717 N. Harwood St., Suite 3400, Dallas, Texas 75201, (214) 859-1800, 833-4HILLTOP.