Retail sales for March will be reported on Friday morning. Taking our models at face value, we think retail sales should be up 0.4% for the month, despite a slight slowdown in the pace of auto sales.
However, Easter was on the early side this year. The last three years that Easter was in March – 2002, 2005, and 2008 – all had sales below what our models would have suggested. Subsequent months had sales coming in above model expectations. We are not sure why this happens. One would think that Easter-related discounts and shopping needs should boost sales. The problem might be that shoppers react less now than in the distant past to Easter sales, and, as a result, the Census Bureau overcompensates for what it expects to be a large jump in volume that doesn't fully materialize.
Taking this effect into consideration, we now expect Friday's sales report to show a slight decline, about -0.1% for March. We expect some analysts will react bearishly to this kind of report. Instead, our readers should keep in mind the difficulty the Census Bureau has seasonally-adjusting data for a moving holiday like Easter. Sales will rebound in the months ahead and the plow horse economy remains intact.