The numbers: Sales at U.S. retailers rebounded 0.4% in April largely because of strong demand for new autos and higher consumer spending online, offering a respite from a broad slowdown in consumer spending.
Sales had been forecast to rise 0.8%, based on a Wall Street Journal poll of economists.
Retail sales are a big part of consumer spending and offer clues about the strength of the economy. Before April’s increase, retail sales had fallen in four of the prior five months.
Retail sales rose a somewhat stronger 0.6% in April if auto dealers and gas stations are excluded. Car and gasoline purchases exaggerate overall retail spending.
Key details: Sales of new vehicles and auto parts, an up-and-down category, rose 0.4% last month.
Receipts at gas stations, on the other hand, fell 0.8%. They were expected to rise due to an increase in oil prices last month, but it appears Americans drove less.
Retail sales were fairly strong if car dealers and gas stations are set aside, giving a better idea of consumer demand. Most of the increase was limited to just a few categories, however.
Sales rose at Internet retailers, general stores and home centers such as Home Depot
HD,
and Lowe’s
LOW,
Most other major retail categories posted lower sales.
One category economists watch closely is bars and restaurants, the only service sector in the retail report. Restaurant receipts rose 0.6% and increased for the second month in a row
Restaurant sales tend to rise when the economy is healthy and Americans feel secure in their jobs. Sales slack off during times of economic distress.
Big picture: The increase in retail sales is unlikely to mark the start of a sustained uptrend. Rising interest rates orchestrated by the Federal Reserve to tame high inflation have slowed the economy and curbed consumer appetites for big-ticket items.
A super-strong labor market and rising incomes probably will keep retail consumer spending aloft barring a recession. Americans are still spending plenty of money on services such as travel, recreation and dining.
Looking ahead: “Consumer spending is downshifting but not contracting, despite high borrowing costs and tighter borrowing standards,” said senior economist Sal Guatieri of BMO Capital Markets.
“Consumer spending will likely be a headwind to economic growth in 2023,” said chief economist Bill Adams of Comerica.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to open lower in Tuesday trades.
Read the full article here