Sales at U.S. retailers were little changed in April, starting the second quarter on a weak note as Americans remained reluctant to splurge.
The reading followed a revised 1.1 percent gain in March that was the biggest in a year and larger than previously estimated, Commerce Department figures showed Wednesday in Washington. The median forecast of 88 economists surveyed by Bloomberg called for a 0.2 percent gain in April.
Consumers have been using the windfall from cheap gasoline to boost savings as wages have been slow to pick up, which may temper the projected rebound in U.S. growth this quarter. At the same time, steady hiring and low borrowing costs will help underpin household spending, which accounts for about 70 percent of the economy.
“It’s certainly is a disappointing report,” said Guy Berger, an economist at RBS Securities Inc. in Stamford, Conn., who projected sales would be unchanged and is the top-ranked forecaster for retail purchases over the past two years, according to data compiled by Bloomberg. “We are going to need to see some of these categories that were weak in April firm up in May and June.”
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Absent that, “there'll be some head-scratching that the economy is not coming back as strong as expected,” he said.
Department stores hit
Another report Wednesday showed the cost of foreign-made goods unexpectedly dropped 0.3 percent in April as the relatively strong dollar held down expenses for such things as food and automobiles.
Seven of 13 major categories showed gains, led by restaurants and bars and online merchants, the report showed. A tiny advance among miscellaneous stores tipped the balance in favor of gainers.
The dour tone of the report was reinforced by declines among discretionary items such as automobiles, furniture and electronics. Demand at grocery stores, service stations and general merchandise retailers also declined. The latter category includes department stores, which saw their biggest drop in purchases since January 2014, when snow blanketed much of the U.S.
Sales declined 0.4 percent at automobile dealers, after jumping 2.9 percent the previous month.
The upward revisions to most categories for March were a saving grace for the otherwise disappointing figures for April, and indicate consumer spending in the first quarter will be stronger than previously estimated.
The weather factor
Unusually harsh winter weather was blamed for some of the slowdown in retail sales in the early part of 2015, when delays related to a West Coast port dispute also held back other economic activity. The economy barely grew in the first quarter, with GDP advancing at a 0.2 percent annualized rate.
Since it’s still early in the quarter, some economists are more sanguine.
“It’s too early to add up the quarter based on one disappointing number,” Jim O'Sullivan chief U.S. economist at High Frequency Economics in Valhalla, New York, said before the report. “The job market is improving. Wage income is growing. Wealth has been generally rising, that’s a plus on top of wage income growth.”
The labor market continues to provide the wherewithal for Americans to spend. Payrolls bounced back in April with a 223,000 increase following a 85,000 gain the prior month, and the jobless rate fell to 5.4 percent, the lowest since May 2008, according to Labor Department data.