Retail sales in the U.S. stopped unexpectedly in April as the momentum for stimulus controls faded, but is likely to accelerate in the coming months amid record savings and a reopening. of the economy.
The U.S. Department of Commerce report on Friday also showed that retail sales in March were much stronger than previously estimated, placing consumer spending on a path of higher growth toward the second quarter. There were also signs that Americans were beginning to shift spending from goods to services such as restaurants and bars, with more than a third of the population vaccinated against COVID-19.
“There will be momentum towards the second quarter for economic growth because sales were off the charts in March,” said Chris Rupkey, a New York City economist.
The unchanged reading in retail sales last month followed a 10.7 per cent increase in March, the second largest increase on record and a bullish revision over the previously reported 9.7 per cent increase. Economists polled by Reuters news agency had predicted that retail sales would rise 1.0 percent. Retail sales increased 51.2% year-on-year.
A 2.9 percent increase in motor vehicle purchases was offset by declining spending elsewhere. Sales at clothing stores fell 5.1 percent. There were also declines in sales of sporting goods, hobbies, musical instruments and bookstores. Sales at building materials stores fell 0.4 percent. Online retail sales fell 0.6 percent.
But receipts at electronics and home appliance stores rose 1.2 percent. Sales at furniture stores fell 0.7 percent. Consumers also increased spending on restaurants and bars, leading to a 3.0 percent increase in receipts. This followed after a 13.5% jump in March. Sales at restaurants and bars are 116.8 percent higher compared to April 2020.
Vaccinated Americans are sponsoring restaurants and bars after being hosted at home for more than a year.
Retail sales represent the goods component of consumer spending, with services such as health, education, travel and hotel accommodation constituting the other part. U.S. households have amassed at least $ 2.3 trillion in excess savings during the coronavirus pandemic, which is expected to sustain spending this year.
We will see that more and more people are changing a larger proportion of their spending from ‘things’, which are captured by retail sales, to ‘experiences’, which are reflected in wider consumer spending. said James Knightley, chief international economist at ING in New York.
Many qualified households received an additional $ 1,400 in March, which was part of the $ 1.9 trillion pandemic rescue package from the White House approved earlier this month.
Some economists said the neutral retail sales report could ease financial market concerns about inflation, which were fueled by reports this week that showed strong consumer and producer price increases in April. .
Wall Street stocks traded higher, while the dollar fell against a basket of currencies. US Treasury prices rose.
“Bond yields are lower and the curve a little flatter, perhaps because the crest of the stimulus-driven spending wave driving the uncomfortably high inflation we just saw on Wednesday and yesterday is rising,” he said. Chris Low, chief economist at FHN in New York.
Excluding cars, gasoline, building materials and food services, retail sales fell 1.5% last month after a revised upward rise of 7.6% in March. These so-called basic retail sales are more in line with the consumer spending component of gross domestic product. Previously, it was estimated that they shot up 6.9% in March.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, expanded at an annualized rate of 10.7 percent in the first quarter, adding 7.02 percentage points to the annualized growth rate of 6.4 percent of the economy.
Much of the increase in consumer spending last quarter came in March, which set a higher growth base for consumption in the second quarter. Economists maintained their high estimates of consumer spending in the second quarter. Even if retail sales don’t pick up much in the coming months, spending on services will more than make up for it.
“Retail sales growth will be solid for the rest of this year,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. “Consumers have saved billions of dollars in incentive payments and will gradually spend those funds over the next two years.”
But there is concern that the shortage of labor and raw materials, which make production difficult in factories, may weigh on retail sales. Ports also do not have enough workers to unload ships, which delays the delivery of imported consumer goods. Companies have run out of first-quarter inventory and are struggling to recover.
A separate Federal Reserve report on Friday showed that manufacturing production rose moderately in April, with motor vehicle production declining amid a global shortage of semiconductors.
“The recovery in production is still far behind in consumption, and with the shortage becoming more acute and widespread, this situation will only get worse in the coming months,” said Paul Ashworth, chief economist at Capital Economics in Toronto.