Retail sales slow, but growth outlook still upbeat

WASHINGTON Tue May 13, 2014 12:34pm EDT

A woman shops at The Grove mall in Los Angeles November 26, 2013. REUTERS/Lucy Nicholson

A woman shops at The Grove mall in Los Angeles November 26, 2013.

Credit: Reuters/Lucy Nicholson

WASHINGTON (Reuters) - U.S. retail sales braked sharply in April after strong gains in the prior two months, but that did little to change views the economy was poised for faster growth this quarter.

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

"The consumers are catching their breath after a rebound from the winter freeze, but we do remain on track to see stronger consumer spending ... through the remainder of this year," said Robert Dye, chief economist at Comerica in Dallas.

Retail sales, which account for a third of consumer spending, rose 1.5 percent in March, the biggest gain in four years. That followed a healthy increase in February and reflected the release of pent-up demand after a brutally cold start to the winter.

Economists, who had forecast sales advancing 0.4 percent last month, said a late Easter could have caused difficulties smoothing the data for seasonal fluctuations, causing the sharp swing from March to April.

Prices for U.S. Treasury debt rose on the data, while the dollar gained against a basket of currencies. U.S. stocks rose marginally, with the Dow Jones industrial average and Standard & Poor's 500 index both inching to record levels.

Data such as employment as well as manufacturing and services industries surveys have suggested the economy regained strength early in the second quarter. Growth was held down to a 0.1 percent annual rate in the first quarter by bad weather and a slow pace of restocking by businesses.

However, output will likely be revised down to show a contraction. A second report from the Commerce Department showed retail inventories excluding auto stocks barely rising in March.

The government had assumed a big increase in these stocks when it made its advance GDP growth estimates last month. March trade, construction spending and factory inventory data, which the government did not have in hand for the GDP estimate, have also suggested downward revisions to output.

But growth is expected to top a 3 percent rate this quarter.


While a gauge of consumer spending slipped in April, economists said the weak growth performance at the start of the year had probably made households more careful about spending.

"It's possible that consumers are being a bit more cautious in their spending habits as they await confirmation that the economy is, in fact, poised to reaccelerate," said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.

So-called core sales, which strip out automobiles, gasoline, building materials and food services and correspond most closely with the consumer spending component of GDP, dipped 0.1 percent in April.

That followed a 1.3 percent advance in March. Still, economists were largely unframed by the drop and said consumer spending was on track to post a third consecutive quarter of robust growth, citing a firming labor market.

"Despite an overall seemingly weak April retail sales report, thanks to the pop in March, the second quarter is starting off at a higher level that is consistent with strong consumption in the quarter," said Bricklin Dwyer, an economist at BNP Paribas in New York.

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

Weak import prices are helping to keep inflation muted. The lack of inflation pressures in the economy suggests the Federal Reserve could keep monetary policy very accommodative for a while even as labor market slack starts to ease.

The U.S. central bank slashed overnight interest rates to a record low of zero to 0.25 percent 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.

While declines in receipts at electronics and appliance stores, furniture outlets and food services and drinking places restrained sales last month, sales at auto dealerships rose.

There were also increases in sales at building materials and garden equipment and supplies dealers, clothing stores and sporting goods shops.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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Comments (32)
John1980 wrote:
This Retail sales miss should be good for new record highs today for the stock market.

May 13, 2014 8:46am EDT  --  Report as abuse
Bradnaksuthin wrote:
Whenever I look at my 401 K portfolio I am reminded of how far we have come in 6 years.
6 years ago, as President Bush was preparing to turn the country over to Obama my 401K retirement had collapsed. I remember turning to my wife after looking at our Charles Schwarb statement as saying “We’ve lost half of our retirement investments”
As Bush was preparing to leave office in early 2009 I think the DOW have fallen to 8000 and the NASDAQ had plunged to 1500.
The country was in economic freefall. Banks were going out of business, housing prices were falling like a rock, hundreds of thousands of workers were being laid off every month. The US auto industry was on it’s knees begging for a bailout. The Bush administration borrowed 700 billion dollars from the taxpayers to bail out the banks..which were frozen in fear. Newscaster started using the word “2nd Great Depression”.
Back then, I thought to myself “I am actually going to live through an Economic Depression like my dad did”, “All my retirement savings for the last 30 years are going to disappear”. “We will end up having to work for the rest of our lives instead of enjoying retirement”

How different things are today…6 years later.
The worst recession in US history is over
People are going back to work
Banks are healthy and profitable again
The US auto industry is the pride of the nation
Housing prices are on the rise again
Gas prices, adjusted for inflation, are lower than they’ve ever been before
Inflation is low
Interest rates are low

And the stock market? Businesses are booming.
It’s in record territory. It has NEVER been this high
the DOW is higher than it has ever been in it’s history
the NASDAQ has tripled since the closing days of the Bush administration.

So….Now that I am actually in retirement and cashing out my retirement investments

6 years ago, with the country in economic chaos, I could not have dreamed that our country would be where it is today. It was unthinkable. Unimaginable.

Yet here we all are today….in a country that rose from the ashes of economic disaster called the GREAT AMERICAN RECESSION….to become a vibrant growing healthy economy.

in 2009 the Bush administration handed Obama handed a rotten lemon…and in 6 years he has turned it into sparkling Champagne.

May 13, 2014 9:34am EDT  --  Report as abuse
klawrence wrote:
Gas prices adjusted for inflation: Both are astronomical.

Your 401k has done well: Why? Because we are pumping manufactured money into the system.

Stop looking at the superficial and dig deeper. We are in trouble.

May 13, 2014 9:46am EDT  --  Report as abuse
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