May 15, 2018 11:45 AM, EDT

Retail Sales Gain Points to Healthier Second Quarter


U.S. retail sales rose in broad fashion last month as bigger after-tax paychecks helped compensate for rising fuel costs, signaling consumer demand was off to a firm start this quarter.

The value of sales increased 0.3% in April, matching the median forecast, after a 0.8% advance in the prior month that was stronger than initially reported, Commerce Department figures showed May 15.

So-called retail-control group sales, which are used to calculate gross domestic product and exclude food services, auto dealers, building materials stores and gasoline stations, improved 0.4% after an upwardly revised 0.5% gain.

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The results add to the expectation that consumer spending, the biggest part of the economy, will rebound from its first-quarter weak patch. A strong job market and higher take-home pay in the wake of tax reductions are buoying Americans’ wherewithal to spend and cushioning the squeeze from costlier fuel that leaves people with less money to buy other goods and services.

“Households are in good spirits and are spending in the new season,” James Knightley, chief international economist at ING Bank, wrote in a note. “Employment is rising, wages are growing and tax cuts means there is more cash in people’s pockets.”

The yield on the U.S. 10-year Treasury note climbed to 3.05% after the report and a separate figure showing manufacturing in New York state expanded at a faster pace this month.

Retail sales data for February also were revised up to unchanged from a previously estimated 0.1% decrease.

Nine of 13 major retail categories showed advances in April, led by the biggest jump in sales at apparel stores since March of last year. Increased receipts also were evident at furniture merchants, building-materials outlets, Internet retailers and department stores.

Filling-station receipts increased 0.8%, the most since January and reflecting a jump in gasoline costs that are now near the highest level since late 2014. That probably boosted retail sales as Commerce Department figures aren’t adjusted for price changes.

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Excluding automobiles and gasoline, retail sales also rose 0.3% after an upwardly revised 0.4% gain in the previous month.

The Commerce Department’s retail report may help economists tweak their forecasts for how consumer spending began the second quarter after growing 1.1% in the first three months of 2018, a slowdown after three quarters of robust gains.

While consumer spending has remained solid in this expansion, business investment also has been posting strong growth in recent quarters. Tax cuts that President Donald Trump signed into law at the end of 2017 were seen as providing a further jolt to consumption and capital spending that would spur growth toward the president’s 3% goal.

Economists including those at Bank of America Corp. and JPMorgan Chase & Co. have noted the recent runup in gasoline prices, and said persistently higher fuel costs this year would risk eroding a sizable portion of the tax benefits.

Demand for automobiles barely rose. Purchases at automobile dealers climbed 0.1% after increasing 2.1% in the previous month.

Other Details

• Receipts at clothing stores increased 1.4%; sales at furniture stores were up 0.8%.

• Sales rose 0.2% at department stores and 0.3% at general merchandise outlets.