Retail Sales Rise Most in a Year, Marking US Consumer Comeback
Sales at retailers jumped in April by the most in a year, indicating consumer spending will help the U.S. economy recover from a slowdown earlier this year.
Purchases climbed 1.3% last month, the biggest gain since March 2015, after a 0.3% March drop that was smaller than previously reported, Commerce Department figures showed May 13 in Washington. The median forecast of economists surveyed by Bloomberg called for a 0.8% gain.
Healthier household finances, reflecting reduced borrowing and increased savings, mean consumers have the wherewithal to boost spending even as gasoline prices rise and job growth moderates. That can help shore up profits at retailers such as Macy’s Inc. after a disappointing start to 2016.
“This is all part and parcel of the consumption numbers coming more in line with the income numbers we’ve been seeing,” said Jacob Oubina, senior U.S. economist at RBC Capital Markets in New York. “The breadth of this report was extremely constructive.”
Sales estimates in the Bloomberg survey ranged from gains of 0.2% to 1.5%. March’s reading was revised from a previously reported 0.4% decrease.
Eleven of 13 major retail categories showed increases last month, indicating the advance was broad-based. Demand at auto dealers climbed by the most in a year and sales at grocery stores and online merchants were the strongest in almost two years.
Core sales, the figures that are used to calculate gross domestic product and which exclude such categories as autos, gasoline stations and building materials, advanced 0.9% last month, the most since March 2014, after a revised 0.2% increase in March that was larger than previously reported.
The report will probably prompt economists to boost forecasts for second-quarter consumer spending and economic growth after a disappointing start to the year.
The household spending that makes up about 70% of the economy is projected to advance at a 2.6% annualized pace in the three months ending in June after a 1.9% gain in the first quarter, according to median forecast of economists surveyed by Bloomberg before the retail sales data.
Purchases at auto dealers increased 3.2%, reversing February’s drop. It was the biggest gain since March 2015.
The auto figures are in line with industry data. Sales of cars and light trucks climbed to a 17.3 million annualized rate last month, according to Ward’s Automotive Group figures. After a drop the prior month, the April data bring sales more in line with the average over the past year that showed cheaper fuel and low interest rates were drawing more Americans especially to SUV and pickup truck purchases.
Retail sales excluding autos rose 0.8% in April, also more than projected by economists surveyed by Bloomberg.
The strong rebound in sales last month does suggest that this year’s early Easter holiday made it difficult for the government to adjust the data for seasonal swings in demand.
Still, rising fuel costs and moderating improvement in the labor market probably will put a ceiling on consumer spending gains. Gasoline prices have staged a rebound from a steady eight-month plunge. The average cost of a regular gallon of gas was at $2.20 as of May 11, compared with $1.70 in mid-February, according to data from auto group AAA.
Employers in April added the fewest workers to payrolls in seven months, while the unemployment rate held at 5%. At the same time, average hourly earnings climbed 0.3% from the prior month after a 0.2% advance. Worker pay rose 2.5% over the 12 months ended in April after a 2.3% gain a month earlier.
A bleaker outlook from Macy’s after the company reported weaker-than-expected first-quarter revenue this week renewed concerns about the retail industry’s prospects this year. Macy’s slashed its profit forecast for 2016, depressing stocks for other stores, including Wal-Mart Stores Inc., Michael Kors Holdings Ltd. and Ross Stores Inc.
The dimmer projections from Macy’s are a lingering sign of weak mall traffic and increased competition from within and outside the department-store category.