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Retail sales in the US are boosted by a record surge in gasoline receipts in March

Retail sales in the U.S. increased more than expected during March, as the war against Iran led to higher gasoline prices. This led to record receipts in service stations and tax refunds boosted spending in other areas.

The report released by the Commerce Department Tuesday confirmed that economists expected economic growth to pick up in the first three months of the year - after 'nearly stagnating' in the last quarter of 2025. The U.S.-Israeli war against Iran casts a shadow on the economy.

James McCann is a senior economist at Edward Jones. He said that the households are resilient and may rely on their tax refunds or broader savings in order to continue spending despite the recent price pressure.

Census Bureau of the Commerce Department reported that retail sales rose 1.7% in March, which is the highest increase since March 2025. This follows a 0.7% rise in February that was upwardly reviewed. The economists surveyed by predicted retail sales, which are mainly goods and not adjusted for inflation, would increase 1.4% following a 0.6% gain in February. Estimates varied from a 2.0% increase to a 0.4% rise.

In March, sales increased 4.0% compared to the same month last year. After the government shutdown last year, the Census Bureau is now releasing data on retail sales monthly. Next month, the retail sales report will be published on time. Data from the U.S. Energy Information Administration shows that retail gasoline prices rose 24.1% in march, a jump of more than 30 percent due to the Middle East conflict. Last week, the government announced that the Consumer Price Index rose 0.9% for the month of March. The main reason was gasoline.

The Federal Reserve's interest rate policy was influenced by the strong retail sales and the data on inflation.

The dollar rose against a basket of currencies, and U.S. Treasury yields largely increased. U.S. stock markets opened higher.

Consumers feeling pain at the pump

The government began tracking gasoline station sales in 1992. In February, service station receipts had only risen by 1.3%.

Tax cuts and refunds could be affected if the pain at gas pumps is too great. Stanford Institute for Economic Policy Research economists estimated that the war-driven spikes in gasoline prices have increased Americans' annual average gas costs by $857.

Internal Revenue Service statistics showed that the average tax refund through March 27, 2025 was $351 higher than it was in 2025. Treasury Department estimates that the average tax refund will be $1,000 more than in 2024.

The tailwind of a record-breaking refund season is set to fade, and households will be forced to reduce their discretionary spending, as energy prices remain high, said Nancy VandenHouten, the lead U.S. economics at Oxford Economics.

In April, consumer sentiment hit a new low. Tax refunds provide some cushion for now and allow consumers to continue spending. In March, auto dealership sales rose by 0.5%. This was likely due to incentives offered by manufacturers. Furniture store receipts increased by 2.2% while those at electronics and appliance stores rose 0.9%.

Sales at stores selling building materials and garden equipment increased by 0.7%. Non-store retailers saw their sales increase by 1.0%.

Also, receipts increased at general merchandise stores, health and personal care shops and food and beverage retailers.

Consumers are cutting back on discretionary expenditure. The only service component of the report - sales at eating and drinking establishments - increased by 0.1% after rising 0.5% in Feb. Economists consider dining out to be a major indicator of household finances.

The sales at sporting goods, book, hobby and musical instrument stores, as well as the receipts in clothing retailers, remained unchanged.

Retail sales, excluding automobiles and gasoline, building materials, food services, and other items, increased by 0.7% in march, after a 0.6% increase in February, which was revised upwards.

The core retail sales are the most closely related to the consumer spending component of gross domestic product. They were reported as having risen 0.5% in February. Before the report, economists thought that consumer spending growth had slowed from the fourth-quarter's annualized 1.9% rate. The Atlanta Federal Reserve’s GDPNow model tracks a growth rate of 1.3% for the quarter January-March.

The fourth quarter saw an economic growth of 0.5%. Next week, the government will release an advance estimate of first-quarter GDP.

(source: Reuters)