Clothing, cars drive boost in retail spending

WASHINGTON — Lower-priced gas allowed Americans to step up their spending at retailers in April, from cars and clothes to electronics and appliances. The rebound from a weak March suggests consumers remain resilient in the face of higher taxes.

Retail sales edged up 0.1 percent in April, the Commerce Department said Monday. That's an improvement from a 0.5 percent decline in March, the largest drop in nine months.

The April gain was stronger when taking out the effect of lower gas prices, which reduced sales at gas stations 4.7 percent. When excluding gas station sales, retail spending rose 0.7 percent. And core retail sales, which exclude gas, autos and building supplies, increased 0.5 percent. Economists pay close attention to core sales because they strip out the most volatile categories.

Sales of autos rose 1 percent in April, rebounding from a 0.6 percent drop in March. Sales at clothing stores increased 1.2 percent and sales at general merchandise stores, a category that covers department stores, rose 1 percent. Sales were also strong at building materials and garden supply stores and electronics and appliance stores.

Consumers increased their spending in April, despite paying higher Social Security taxes that has reduced their paychecks this year. And their spending will likely add to economic growth in the April-June quarter.

"This is a good start to the second quarter," said Jennifer Lee, senior economist at BMO Capital Markets. "The rest of the year is expected to rise further on stronger household finances."

The economy grew at a 2.5 percent annual rate from January through March, up from a 0.4 percent rate in the October-December quarter of 2012. But most of the increase came from greater spending at the start of the quarter. Consumers cut back sharply on retail spending in March, while paying more for utilities to heat their homes during a colder-than-usual month. The economy added 165,000 jobs in April and has created an average of 208,000 jobs a month since November. That's well above the monthly average of 138,000 for the previous six months.

A surging stock market and increases in home prices may be making consumers feel wealthier and more inclined to spend.

Most economists still expect growth to weaken slightly in the April-June quarter. But after seeing the more upbeat retail sales figures for April, some are raising their forecasts. Analysts at JPMorgan now predict growth will slow to a 2 percent rate, up from their previous forecast of 1.5 percent. And many expect economic growth will strengthen in the second half of the year.

What we bought

Overall U.S. retail sales rose 0.1 percent in April compared to a year earlier. Here's a look at the sales change in some key sectors:

CLOTHING STORES

+1.2%

GENERAL MERCHANDISE

+1%

AUTOS

+1%

GAS STATIONS

-4.7%

What we bought

Overall U.S. retail sales rose 0.1 percent in April compared to a year earlier. Here's a look at the sales change in some key sectors:

CLOTHING STORES

+1.2%

GENERAL MERCHANDISE

+1%

AUTOS

+1%

GAS STATIONS

-4.7%

Inventories

U.S. businesses left their stockpiles unchanged in March for a second straight month, while their sales fell sharply. The Commerce Department said Monday that business stockpiles showed no increase in March while sales fell 1.1 percent in March, offsetting a 1 percent gain in February. A lack of inventory building could slow economic growth because it means businesses are ordering fewer factory-made goods.

Clothing, cars drive boost in retail spending 05/13/13 [Last modified: Tuesday, May 14, 2013 12:24am]

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