WASHINGTON — Unseasonably warm weather boosted retail sales across the country from mid-February through late March, but rising gasoline prices raised red flags and slightly impacted consumer spending in some regions, the Federal Report’s Beige Book report showed Wednesday.
The Fed’s anecdotal snapshot of economic activity showed that the economy continued to expand at a “modest to moderate pace,” while retail sales reports were largely positive across the regions.
Retail sales in Boston, New York and St. Louis were characterized as “strong,” while sales in Chicago and Richmond showed “a significant strengthening” in retail spending. Apparel sales were strong in Boston and New York, the report highlighted. Sales expanded at a moderate pace in Philadelphia, Minneapolis, Kansas City and Dallas.
“Reports from Boston, Atlanta, St. Louis and Kansas City indicated a positive near-term outlook for retail spending,” the report said. “However, contacts in Philadelphia, Cleveland, Atlanta, Chicago and Kansas City expressed concerns that rising gas prices could limit discretionary spending in the months to come.”
In Boston, retailers “expressed concern about what rising energy costs may do to consumers’ willingness to spend.” But in the time period covered by the report, apparel, furniture and other household goods sold well, thanks to a mild winter and improving consumer sentiment.
One major retail chain in New York reported sales running 5 percent above plan, driven primarily by strength in spring apparel and accessories sales. However, “gas prices pinched” consumers in Philadelphia, the report said. “While mild weather attracted more people, the average purchase per store dropped from year-ago levels,” the Fed said.
Retailers in Cleveland said the warm weather drove sales across their product lines, but many retailers said middle income households remain “challenged.”
“These consumers are trading down, looking for value, and they remain very sensitive to rising gasoline prices,” the Fed said.
Gasoline prices also tempered more favorable retail sales reports in Atlanta, Chicago and Kansas City.
“Several contacts thought that the recent gains in consumer spending might dissipate over the medium-term, pointing to the temporary nature of the boost from warmer weather and concerns about the impact of higher gasoline prices on consumer budgets,” the report said, citing responses from retailers in Chicago.