Weak retail sales cast shadow on US growth outlook

US car sales were up 0.6% in April, but in many other retail sectors April sales were lacklustre, dampening hopes of a strong second quarter. – Reuters pic, May 13, 2014.US car sales were up 0.6% in April, but in many other retail sectors April sales were lacklustre, dampening hopes of a strong second quarter. – Reuters pic, May 13, 2014.US retail sales barely rose in April, tempering hopes of a sharp acceleration in economic growth in the second quarter.

The Commerce Department said on Tuesday retail sales edged up 0.1% last month, held back by declines in receipts at furniture, electronic and appliance stores, restaurants and bars and online retailers.

Retail sales, which account for a third of consumer spending, rose by a revised 1.5% in March. That was the largest increase since March 2010 and reflected pent-up demand after a brutally cold winter.

US Treasury debt prices rose on the data, while the dollar trimmed gains versus the euro.

"You had a spectacular March. You are now having an April hangover. The reality of the economy is decent, but not great. Some people over-extrapolated the March numbers," said Guy Berger, an economist at RBS in Stamford, Connecticut.

Data such as employment, as well as manufacturing and services industries surveys had suggested the economy regained strength early in the second quarter, after being weighed down by bad weather and a slow pace of restocking by businesses in the first three months of the year.

The retail sales report cast a shadow on that upbeat outlook. So-called core sales, which strip out automobiles, gasoline, building materials and food services, and correspond most closely with the consumer spending component of gross domestic product, fell 0.1% in April.

That followed a revised 1.3% advance in March. Core retail sales had previously been reported to have risen 0.8% in March.

Tepid demand could see inflation pressures remaining benign for a while.

In a separate report, the Labour Department said import prices fell 0.4% last month after rising 0.4% in March. In the 12 months through April, import prices fell 0.3%.

The lack of inflation pressures in the economy suggests the Federal Reserve could keep monetary policy accommodative for a while, even as labour market slack starts to ease.

The US central bank slashed overnight interest rates to a record low of zero to 0.25% in December 2008 and pledged to keep them low while nursing the economy back to health.

The Fed is scaling back the amount of money it is injecting into the economy through monthly bond purchases.

Last month, retail sales were restrained by a 2.3% drop in receipts at electronics and appliance stores. Sales at furniture stores fell 0.6%, while receipts at food services and drinking places dropped 0.9%.

Sales at non-store retailers, which include online sales, fell 0.9%.

However, receipts at building materials and garden equipment stores rose 0.4%, and sales at auto dealerships increased 0.6%. There were also increases in sales at gasoline stations, reflecting higher pump prices.

Excluding gasoline and autos, retail sales fell 0.1%.

Receipts at clothing stores rose 1.2%. There were also gains in receipts at sporting goods shops. – Reuters, May 13, 2014.


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