Friday, June 2, 2023

US retail sales lower than expected, but remain strong

WASHINGTON – U.S. retail sales grew less than expected in April, but the underlying trend was strong, suggesting consumer spending remained strong in the second quarter despite rising risks of a recession this year.

The Commerce Department reported Tuesday that retail sales rose 0.4% last month. Data for March was revised downward slightly to show a sales decline of 0.7% instead of the previously announced 0.6%. Economists polled by Reuters had forecast a 0.8% rebound in sales.

Retail sales mainly consist of goods, which are usually purchased on credit and are not adjusted for inflation. The only category of services in the retail sales report is food and beverage services.

Rising retail sales added to strong job growth in April, suggesting the economy was experiencing a spring revival after activity slowed in February and March. Strong wage growth supported by tight labor markets is supporting spending.

Some families still have savings accumulated during the COVID-19 pandemic. Economists expect a recession as the cumulative and backward effects of the Federal Reserve’s sharpest interest rate hike campaign since the 1980s to rein in inflation begin to have a cascading effect on the economy.

Banks are also tightening lending norms, which may make loans unaffordable for some consumers.

Excluding automobiles, gasoline, building materials and food services, retail sales rose 0.7% last month. Data for March was slightly revised to show a 0.4% decline in so-called core retail sales instead of the previously reported 0.3%.

Core retail sales are closer to the consumer spending component of GDP. Consumer spending, which accounts for more than two-thirds of US economic activity, accelerated in the first quarter, offsetting the drag on GDP growth from inventory shortages.

The economy grew at an annual rate of 1.1% in the last quarter. The Atlanta Fed currently forecasts GDP to grow at 2.7% in the second quarter.

Nation World News Desk
Nation World News Desk
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