U.S. retail sales rebounded in March
after three straight monthly declines as households boosted purchases of motor
vehicles and other big-ticket items, suggesting consumer spending was heading
into the second quarter with some momentum.
Economists saw a limited impact on
retail sales for now from a recent ebb in consumer sentiment, citing a robust
labor market, which is steadily pushing up wage growth.
Consumer sentiment slipped in early
April as households worried about the potential impact of the Trump
administration’s trade policies on the economy. Fears of a trade war between
China and the United States have roiled financial markets.
“The
trade war and battered stock market may yet cause the consumer to temper their
consumption expenditures, but for the moment, the sun is out and shining,” said
Chris Rupkey, chief economist at MUFG in New York. “Consumers are doing their
part to drive the economy forward as they restart their engines from a cold and
snowy winter.”
The Commerce Department said on Monday
retail sales increased 0.6 percent last month after an unrevised 0.1 percent
dip in February. January data was revised to show sales falling 0.2 percent
instead of the previously reported 0.1 percent drop.
Economists polled by Reuters had
forecast retail sales rising 0.4 percent in March. Retail sales in March
increased 4.5 percent from a year ago.
Excluding automobiles, gasoline,
building materials and food services, retail sales rose 0.4 percent last month
after being unchanged in February. These so-called core retail sales, which
correspond most closely with the consumer spending component of gross domestic
product, were previously reported to have risen 0.1 percent in February.
U.S. financial markets were little
moved by the data as investors watched geopolitical developments. U.S. stocks
rose on waning fears that the weekend’s U.S.-led missile attack on Syria would
escalate into a broader conflict. U.S. Treasury prices fell and dollar weakened
against a basket of currencies.
SLOW FIRST-QUARTER SPENDING
Last month’s pick-up in core retail
sales did little to change expectations of a sharp slowdown in consumer
spending in the first quarter.
Economists largely blame the weakness
in retail sales at the start of the year on delays in processing tax refunds.
Some also argue that income tax cuts, which came into effect in January, only
reflected on most workers’ paychecks in late February.
“The large swing in consumption between
February and March is consistent with an important role for household after-tax
incomes being restrained and then lifted by a unique pattern of tax refunds and
withholdings,” said Michael Feroli, an economist at JPMorgan in New York.
“We believe those forces will remain
supportive for consumption in the second quarter, and after today’s number
remain comfortable with prospects for a rebound in household outlays this
quarter.”
Consumer spending, which accounts for
more than two-thirds of U.S. economic activity, grew at a robust 4.0 percent
annualized rate in the fourth quarter. It is expected to have slowed to below a
1.5 percent rate of increase in the first quarter.
Economic growth estimates for the
January-March quarter are running below a 2 percent rate. The economy expanded
at a 2.9 percent pace in the October-December quarter. The government will
publish its advance estimate for first-quarter GDP growth later this month.
In March, auto sales jumped 2.0
percent, the largest increase since last September, after declining 1.3 percent
in February. Sales at furniture stores climbed 0.7 percent while those at
electronics and appliance stores increased 0.5 percent.
But sales at building material stores
fell 0.6 percent last month and receipts at clothing stores dropped 0.8
percent. Sales at online retailers increased 0.8 percent. Sales at restaurants
and bars gained 0.4 percent. Receipts at sporting goods and hobby stores
dropped 1.8 percent.
While the stock market volatility has
not yet impacted on consumer spending, it is chipping away at business
confidence.
In a separate report on Monday, the New
York Federal Reserve said its Empire State index tumbled seven points to a
reading of 15.8 in April. The survey’s measure of future business conditions
dropped to a more than two-year low.
“This month’s decline in the Empire
State six-month forward index may reflect trade-related uncertainties and the
associated volatility of stocks, or other factors,” said Roiana Reid, an
economist at Berenberg Capital Markets in New York.
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