Record surge in gasoline receipts boosts US retail sales, but weakness is looming

By Lucia Mutikani

WASHINGTON, April 21 (Reuters) – U.S. retail sales increased more than expected in March as the war with Iran boosted gasoline prices and led to a record surge in receipts at service stations, while tax refunds underpinned spending elsewhere.

Though higher prices largely accounted for the biggest gain in sales in a year, the report from the Commerce Department on Tuesday prompted economists to upgrade their economic growth estimates for the first quarter. The U.S.-Israel war with Iran is, however, casting a shadow over the economic outlook.

Economists expected a considerable slowdown in growth this quarter as the tailwind from tax refunds faded and more expensive gasoline pulled spending away from other categories. President Donald Trump said on Tuesday he did not want to extend a two-week ceasefire with Iran.

“Households remain resilient for now, potentially leaning on tax refunds and broader savings to keep on spending in the face of the latest price squeeze,” said James McCann, senior economist for investment strategy at Edward Jones.

Retail sales jumped 1.7% last month, the largest rise since March 2025, after an upwardly revised 0.7% gain in February, the Commerce Department’s Census Bureau said. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, would advance 1.4% after a previously reported 0.6% increase in February. Estimates ranged from as high as a 2.0% increase to as low as a 0.4% gain.

Sales advanced 4.0% on a year-over-year basis in March. Economists estimated sales increased only 0.7% from a year ago when adjusted for inflation. The Census Bureau has now caught up on releasing monthly retail sales data after delays caused by last year’s government shutdown. The retail sales report for April will be released on time next month.

The Middle East conflict has sent global oil prices jumping more than 30%, with data from the U.S. Energy Information Administration showing retail gasoline prices soared 24.1% in March. The government reported last week that the monthly Consumer Price Index increased 0.9% in March, with gasoline being the main driver of higher inflation.

Strong retail sales added to the inflation data in suggesting that the Federal Reserve would keep its benchmark overnight interest rate in the 3.50%-3.75% range for a while.

Stocks on Wall Street were trading lower. The dollar gained versus a basket of currencies. U.S. Treasury yields mostly rose.

CONSUMERS FEELING PAIN AT THE PUMP

Sales at gasoline stations surged 15.5%, the largest gain since the government started tracking the series in 1992. Receipts at service stations had risen only 1.3% in February. Pain at the pump will offset tax cuts and refunds, economists predicted.

Economists at the Stanford Institute for Economic Policy Research estimated that war-driven price spikes have ​pushed up Americans’ average annual gasoline costs for this year by $857. The average tax refund was up $351 through March 27 compared to the same period in 2025, Internal Revenue Service data showed.

The Fed’s Beige Book report last week showed many districts in early April continued to “report signs of consumer financial strain, increased price sensitivity.” Consumer sentiment plunged to a record low in April. Households have also been tapping into savings to fund their spending, while wage growth has slowed.

“We expect households to become increasingly selective,” said Lydia Boussour, senior economist at EY-Parthenon. “Higher fuel costs will act as a tax on consumption, crowding out discretionary spending and leading to demand destruction in price‑sensitive categories.”

Sales at auto dealerships rose 0.5% in March, likely as manufacturers offered incentives. Receipts at furniture stores rebounded 2.2%, while those at electronics and appliance retailers increased 0.9%. Building material and garden equipment store sales rose 0.7%.

Sales at non-store retailers advanced 1.0% as Amazon and other online retailers held spring sales promotions.

There were also increases in receipts at food and beverage stores, general merchandise retailers as well as health and personal care stores.

But consumers scaled back on discretionary spending. Sales at food services and drinking places, the only services component in the report, edged up 0.1% after rising 0.5% in February. Economists view dining out as a key indicator of household finances.

“This is an area where consumers first cut back on their spending in response to financial pressures,” said Gus Faucher, chief economist at PNC Financial. “If these sales remain soft going forward, it could be foreshadowing broader consumer weakness.”

Sales at sporting goods, hobby, musical instrument and book stores were unchanged as were receipts at clothing retailers.

Retail sales excluding automobiles, gasoline, building materials and food services increased 0.7% in March after an upwardly revised 0.6% rise in February.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product, and were previously reported to have climbed 0.5% in February.

Economists at Morgan Stanley raised their first-quarter consumer spending growth estimate to a 1.5% annualized rate from a 1.1% pace prior to the report. Consumer spending grew at a 1.9% rate in the fourth quarter.

Goldman Sachs boosted its GDP growth estimate by 0.5 percentage point to a 3.3% rate. The economy grew at a 0.5% rate in the fourth quarter. The government is scheduled to release the advance first-quarter GDP estimate next week.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)