U.S. consumer spending surged in March. Here’s what drove that

March retail sales across the U.S. surged as consumers faced rising gas prices due to the U.S.-Israel war against Iran, and as they spent their tax refunds and bought candy for Easter.

All told, retail sales rose 1.7% in March, compared to the 0.7% gain in February, according to the numbers released Tuesday, April 21 by the U.S. Commerce Department’s Census Bureau.

It was the fastest pace since January 2023.

Gas prices shot up amid the war in Iran because the conflict has kept ships from being able to move through the Strait of Hormuz, a narrow strip of water that passes by Iran, and through which 20% of the world’s oil and natural gas passes.

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Iran and the U.S. have gone tit-for-tat in enforcing naval blockades of the strait.

The cost of a gallon of gas was $3.94 on Tuesday, compared to $2.96 a year ago, according to figures from travel club AAA.

“An eye-popping headline for retail spending from the consumer in March is quickly brought down to reality with the Iran war boosting the price and dollars spent on gasoline at the pump,” said Chris Rupkey, chief economist at the financial research firm Fwdbonds.

WTI crude oil — the primary oil used in the United States — was trading nearly $89 a barrel, still down from $103 weeks ago but higher than the $67 at the start of the war.

The international standard — Brent crude oil — was trading at over $95 on Tuesday, down from $102 weeks ago but higher than the $70 seen at the start of the conflict.

“Stripping out the big surge in spending on gas due to the Middle East conflict, it’s a solid but more modest 0.6% increase,” Heather Long, chief economist for Navy Federal Credit Union, said in a note.

Larger tax refunds

As for tax refunds, those were larger this year, hence the higher level of retail sales, Neil Saunders, a retail analyst and managing director of GlobalData, a market intelligence and analytics company, said in a Tuesday morning note.

The latest data from the IRS shows that the average tax refund was $3,571 for individual filers, creating a “shot in the arm” for consumer spending, Saunders said.

But even with tax refunds “a lot of consumers are opting for smaller indulgences” rather than big-ticket purchases, he continued.

“The impact of tariffs is visible in the high spending on electronics and appliances due to higher prices,” said Long, the Navy Federal Credit Union economist.

Consumer prices rose in North Jersey by 4.5% in March, inflation data shows, also driven by gas price increases and rising costs of groceries.

Mother’s Day spending projected to hit $38 billion

The next big spending occasion will be Mother’s Day on May 10. Americans are projected to spend a record high $38 billion, beating a previous record in 2023 of $35.7 billion, according to numbers released Tuesday by the trade group the National Retail Federation.

“It is the kind of holiday people don’t sacrifice for,” Saunders, the retail analyst, said in an email. “However, we will likely see a continued focus on gifting experiences rather than just products.”

The inflation numbers come as wages failed to keep up, and economic experts have talked about a so-called “K-shaped economy,” with one trend line pointing up for wealthier consumers and another heading down for middle- and lower-income earners.

Meanwhile the labor market has cooled, especially in New Jersey, where only 5,100 jobs were added to the workforce in 2025 and unemployment stands at 5.2%, one of the highest of any state in the nation.

Daniel Munoz covers business, consumer affairs, labor and the economy for NorthJersey.com and The Record.

Email: [email protected]; Twitter:@danielmunoz100, Facebook and Instagram

This article originally appeared on NorthJersey.com: U.S. consumer spending surged in March. Here’s what drove that

Reporting by Daniel Munoz, NorthJersey.com / NorthJersey.com

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