Retail sales topped Wall Street analysts' expectations in March as consumers continued to spend despite a higher interest rate environment.

Retail sales for the month increased 0.7% from the previous month, according to Census Bureau data. Economists had expected a 0.4% increase in spending, according to Bloomberg data. Meanwhile retail sales in February were revised up to an increase of 0.9%, from a prior reading of 0.6%.

This is the second consecutive monthly uptick in retail sales, suggesting January's surprise 1.1% decrease was more an aberration than a trend.

March sales, excluding auto and gas, increased by 1%, above consensus estimates for a 0.3% increase.

Nonstore retailers led the gains by category, rising 2.7%. The larges decline came in sporting goods and hobby stores, where sales fell 1.8%.

The update on consumer spending comes as the economy has largely remained on solid footing to start 2024. Consensus projections for economic growth in the first quarter have moved higher while the labor market has continued to add more jobs than previously expected.

This strength in the economy has come as recent inflation prints have shown price increases aren't easing as quickly as initially hoped. The combination of stickier-than-expected inflation with an economy that's still growing, has economists believing the Federal Reserve can wait longer to cut interest rates without tipping the economy into recession.

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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