WASHINGTON (Reuters) – US retail sales rose less than expected in April, but the underlying trend was solid, suggesting consumer spending is likely to remain strong at the start of the second quarter, despite rising risks of a recession this year.
Retail sales rose 0.4% last month, the Commerce Department said on Tuesday. Data for March was revised slightly downwards to show sales fell 0.7% instead of 0.6% previously reported. Economists polled by Reuters had forecast a sales increase of 0.8%.
Retail sales are usually goods, which are generally purchased on credit and are not adjusted for inflation. Food and Beverage is the only service category in the retail sales report.
The increase in retail sales contributed to April’s strong job growth and suggested that the economy was experiencing a spring rebound after a slowdown in activity in February and March. Spending is supported by strong wage increases thanks to a tight labor market.
Some households have still accumulated savings during the COVID-19 pandemic. Economists are predicting a recession as the cumulative and delayed effects of the Federal Reserve’s fastest rate hike since the 1980s to curb inflation begin to have a broader impact on the economy.
Banks are also tightening lending standards, which could make credit inaccessible to some consumers.
Excluding cars, gasoline, building materials and food services, retail sales rebounded 0.7% last month. The data for March was revised slightly downwards to show that these so-called core sales fell 0.4% instead of 0.3% as previously reported.
Core retail sales are closest to the consumer spending component of gross domestic product. 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 liquidation.
The economy grew by 1.1% on an annual basis last quarter. The Atlanta Fed currently estimates second-quarter GDP to rise 2.7%.
(Reporting by Lucia Mutikani; editing by Chizu Nomiyama)
