Gas Prices Fuel March Retail Sales Surge, Inflation Rises

This report captures the initial effects of the Iran war, now in its eighth week, which has shut down the Strait of Hormuz and cut off one-fifth of the world's oil supply, pushing U.S. gas prices past $4 a gallon. Excluding gas prices, retail sales still rose 0.6%, supported by government tax refunds and warm weather.

Sales at department stores increased 4.2%, furniture and home furnishings stores were up 2.2%, online retailers saw a 1% gain, and consumer electronics and appliance stores posted a 0.9% increase, while miscellaneous retailers declined. The control group, a key measure for economic growth, rose 0.7%, which economists, including Heather Long, chief economist at Navy Federal Credit Union, cited as a good sign of broad consumer spending.

However, consumer sentiment plunged to a record low in April, according to a University of Michigan survey, largely due to the Iran war and higher gas prices. Analysts, including Bryan Eshelman of AlixPartners, observe consumers shifting from "wants to needs," particularly in the low-end economy.

The jump in gas prices also caused consumer prices to rise 3.3% in March from a year earlier, and 0.9% month-over-month, the largest monthly gain in nearly four years, creating significant challenges for the Federal Reserve and the White House.