Photographs by AP/CHARLIE RIEDEL
Jesus Reyes heads for the checkout on Black Friday last year at a Best Buy store in Overland Park, Kan. The Commerce Department reported Tuesday that retail sales rose at a solid pace in April.
Wednesday, May 16, 2018
Forecasts for a second-quarter rebound in the U.S. economy became more of a reality on Tuesday.
Consumers shrugged off rising gasoline prices last month, as U.S. retail sales rose in broad fashion amid a boost to paychecks from tax cuts, a Commerce Department report showed. The value of purchases at retailers climbed 0.3 percent, matching estimates, after an upwardly revised 0.8 percent gain in March, putting consumer demand in the April-June period on an improved trajectory.
A separate Federal Reserve index showed manufacturing in New York state expanded at a faster pace this month, while a private gauge of homebuilder sentiment advanced for the first time since December. The dollar and 10-year Treasury yields rose, while stocks declined, as the data fueled bets the central bank may raise interest rates three more times this year.
The retail figures indicate that smaller withholdings in the wake of Republican-sponsored tax cuts, combined with a thriving labor market, are allowing households to take higher gasoline prices in stride. The upshot: A rebound in second-quarter consumer spending is becoming clearer after the slowest gain in almost five years.
The average price for a gallon of gas nationwide reached $2.88 Tuesday, up 17 cents from a month earlier and 54 cents from a year ago, according to AAA.
"Some of that energy price burden should be defrayed by the support to incomes from lower tax withholding," Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., wrote in a note. "More importantly, every indicator suggests the bedrock support of growing labor income will continue to push consumer spending forward."
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 were also evident at furniture merchants, building-materials outlets, non-store retailers and department stores.
So-called retail-control group sales, which are used to calculate gross domestic product and exclude food services, auto dealers, building materials and gasoline stations, improved 0.4 percent after an upwardly revised 0.5 percent gain.
Filling-station receipts increased 0.8 percent, 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.
Excluding automobiles and gasoline, retail sales also rose 0.3 percent, after an upwardly revised 0.4 percent gain in the previous month.
"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."
Upward revisions for both March and February data signal that consumers were on a firmer trajectory in the first quarter than previously indicated. The April results were poised to provide evidence that consumer spending was rebounding vigorously from a first-quarter soft patch, yet in light of the revisions to the previous two months, that weakness now looks less extreme. As a result, there is less need to see a dramatic pickup in spending in the current quarter.
"Consumption growth is on track for a big rebound in the second quarter, which should push overall GDP growth up to more than 3 percent," said Michael Pearce, senior U.S. economist at Capital Economics. That would represent an improvement from the January-March quarter when the economy expanded at a 2.3 percent annual rate.
The Commerce Department's retail sales data showed that clothing-store sales jumped 1.4 percent. Sales at home and garden stores rose 0.4 percent. A category that includes online and catalog sales increased 0.6 percent.
Consumer spending climbed at a 4 percent annual rate in the final three months of last year, the sharpest increase in three years. Americans then cut back in January and February before rebounding in March.
Retail sales are closely watched by economists because they provide an early read on consumer spending, the principal driver of the U.S. economy. Store purchases account for about one-third of U.S. consumer spending. Spending on services, such as haircuts and mobile phone plans, makes up the remaining two-thirds.
Information for this article was contributed by Shobhana Chandra, Chris Middleton, Katia Dmitrieva and Jordan Yadoo of Bloomberg News; and by Christopher Rugaber of The Associated Press.
Business on 05/16/2018
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