Salem Radio Network News Thursday, August 11, 2022

Business

U.S. retail sales increase strongly in April

WASHINGTON (Reuters) – U.S. retail sales increased strongly in April as consumers bought motor vehicles amid an improvement in supply and frequented restaurants, providing a powerful boost to the economy at the start of the second quarter.

The broad rise in retail sales reported by the Commerce Department on Tuesday suggested demand was holding strong despite high inflation and assuaged fears that the economy was heading into recession. Rising wages as companies scramble for scarce workers and massive savings accumulated during the COVID-19 pandemic are underpinning spending. Consumers are also increasing their usage of credit cards.

“Given this show of strength from consumers, speculation that the U.S. economy is in danger of an imminent plunge into recession look badly misplaced,” said Paul Ashworth, chief U.S. economist at Capital Economics in New York.

Retail sales rose 0.9% last month, the Commerce Department said on Tuesday. Data for March was revised higher to show sales advancing 1.4% instead of 0.7% as previously reported. April’s increase in retail sales, which reflected both strong demand and higher prices, was in line with economists’ expectations.

Retail sales are mostly goods, and are not adjusted for inflation, which appears to have peaked in April.

The increase in retail sales was led by receipts at auto dealerships, which rebounded 2.2% after falling 1.6% in March. That offset a 2.7% decline in sales at service stations. Prices at the pump retreated from record highs April. They have, however, since surged to an average all-time high of $4.523 per gallon as of Monday, according to AAA.

Excluding gasoline retail sales rose 1.3%. Receipts at bars and restaurants, the only services category in the retail sales report, increased 2.0%. Clothing store sales gained 0.8% as many workers return to offices. Online store sales advanced 2.1%.

Sales electronics and appliance retailers jumped 1.0%, while receipts at furniture stores increased 0.7%. But sales at building material, garden equipment and supplies stores dipped 0.1%. Sales at sporting goods, hobby, musical instrument and book stores fell 0.5%.

STRONG DEMAND

According to the Bank of America, aggregate credit and debit card spending increased 13% year-on-year in April. The bank noted that while inflation was leading to higher spending, it was “clear consumer strength goes beyond this.” Consumer price inflation increased 8.3% year-on-year in April.

A tight labor market is generating strong wages and allowing cash-squeezed consumers to take a second job or pick up extra shifts, providing some cushion against inflation. Households sitting on at least $2 trillion in excess savings, some of which are being deployed to maintain spending.

But with the Federal Reserve adopting an aggressive monetary policy stance to cool demand and bring down inflation, retail sales are expected to slow later this year. The U.S. central bank has increased its policy interest rate by 75 basis points since March. The Fed is expected to hike rates by half a percentage point at each of the next meetings in June and July.

Excluding automobiles, gasoline, building materials and food services, retail sales increased 1.0% in April. Data for March was also revised higher to show these so-called core retail sales increasing 1.1% instead of 0.7% as previously reported.

Core retail sales correspond most closely with the consumer spending component of gross domestic product. Last month’s solid rise in core retail sales suggests that consumer spending got off to a strong start in the second quarter.

Strong consumer spending and robust business investment in equipment helped to underpin domestic demand in the first quarter even as GDP contracted at a 1.4% annualized rate because of a record trade deficit and slightly moderate pace of inventory accumulation relative to the October-December quarter.

(Reporting by Lucia Mutikani, Editing by Chizu Nomiyama)

Previous
Next

Editorial Cartoons

View More »

Michael Ramirez
Wed, Aug 3, 2022

X CLOSE