Retail sales in US move up 0.4% in April on the back of solid job market, retreat in prices

Americans picked up their spending modestly in April, spending money online and dining out, buoyed by a solid job market and a retreat in prices for some things. Car sales also rose despite prices that continue to soar, according to the Commerce Department report issued Tuesday. 

But consumers are facing plenty of challenges heading into the second half of the year from tightening credit to a weaker job market. 

Retail sales increased 0.4 per cent in April compared with March, when sales decreased 0.7 per cent. 

That is the first retail sales increase since January, when unusually warm weather and a big jump in Social Security benefits juiced spending. 

Retail sales data from the U.S. are not adjusted for inflation unlike many other government reports, so the headline increase only matched the monthly rise of 0.4 per cent in the government’s consumer price index for April. 

That indicates that shoppers are struggling to keep up with inflation. 

Sales at car and auto parts dealers rose 0.4 per cent. 

Business at gas stations fell 0.8 per cent despite an uptick in prices at the pump, suggesting Americans cut back on holiday and spring break travel. 

Excluding car dealers and gas stations, retail sales rose 0.6 per cent. Spending increased 1.2 per cent at online retailers and ticked up 0.6 per cent at restaurants and bars. 

However, department stores, electronic stores, sporting goods and hobby stores, as well as home furnishings stores all saw declines. 

Home Depot on Tuesday projected its first decline in annual revenue since 2009 in the aftermath of the bursting of the housing bubble and financial crisis. 

The nation’s largest home improvement retailer cut its profit and sales expectations for the entire year. 

“The April retail sales report shows consumers remain inclined to spend though they are becoming more selective in their purchases,” said Oren Klachkin, lead US Economist at Oxford Economics. 

“However, with storm clouds gathering on the horizon, we think consumer spending will soon run out of steam.”

Americans have remained resilient in their spending even with signs of weakness elsewhere in the economy. 

A solid job market has contributed to that. 

Yet there are signs that they are straining under the weight of higher prices, and the job market is likely to weaken in the second half, most economists believe. 

Shoppers are continuing to trade down to cheaper brands as well and they're pulling back on buying non-essential goods, reversing a pandemic trend. 

Consumer prices in the United States rose again in April, and measures of underlying inflation remained high, implying that the retreat from sharply higher prices is likely to be slow and bumpy. 

"Prices increased 0.4 per cent from March to April," the government said last week, up sharply from a 0.1 per cent rise from February to March. 

Compared with a year earlier, prices rose 4.9 per cent, down slightly from March’s year-over-year increase. 

It was the smallest annual gain in two years.

Economists are watching how costs have impacted consumers spending, which accounts for a majority of U.S. economic activity. 

And the numbers from Home Depot were a rough beginning to a busy week of retail earnings, dragging down the entire sector and the Dow as well.

Walmart, Target and Macy’s will all report quarterly earnings this week and next and all edged lower Tuesday. 

The Commerce Department recently revised its retail-sales data based on the results of annual surveys of retail and services industries. 

The retail report covers only about a third of overall consumer spending and doesn’t include services such as hotel stays and plane tickets, which have rebounded as the threat of COVID-19 eases.