Retail Sales Post Strongest Gain in Six Months
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Retail sales jumped 1.4% in April, the strongest showing in six months, as consumers streamed back into auto showrooms and shopping malls in what was viewed as a signal that this year’s economic slowdown was short-lived.
The Commerce Department said yesterday that the April increase in sales showed widespread strength across a number of retail categories. It followed a weak 0.4% advance in March.
The poor showing for retail sales in March along with a number of other indicators flashing weakness during that month had raised concerns that the economy, hit by a surge in energy prices, could be entering another period of weakness similar to what Federal Reserve Chairman Alan Greenspan had called a “soft patch” in 2004.
But the big jump in retail sales followed reports of a better-than-expected performance on trade and a big jump of 274,000 jobs in April.
“The soft patch isn’t looking as soft as we thought it was,” said David Wyss, the chief economist at Standard & Poor’s in New York.
He said the lower-than-expected trade deficit would likely boost overall economic growth to around 3.5% in the January-March quarter, up from the government’s initial estimate that the economy was growing by just 3.1% during that period.
“We should be able to get 3.5% to 4% growth in the first half of this year, which would be a good solid performance,” Mr. Wyss said.
Nariman Behravesh, chief economist at Global Insight, a consulting firm, said that because of problems adjusting for an early Easter, the weakness in March retail sales and the strength in April sales were probably both overstated.
But he said the April advance “leaves no doubt that the March soft patch is over.”
Wall Street investors were bolstered by the bigger-than-expected rise in retail sales. In afternoon trading, the Dow Jones industrial average was up 15.30 points.
In a second report, the number of U.S. workers filing new claims for unemployment benefits rose by 4,000 to 340,000 last week, the highest level for jobless claims in a month. The four week moving average for claims also rose by 2,000 to 324,000.
Even with the increases, the claims numbers remained at levels indicating the labor market was continuing to improve, analysts said.
In addition, a report released Wednesday by the Commerce Department showed the American trade deficit made its sharpest decline in more than three years during March.
The 1.4% rise in retail sales last month was the biggest gain since a 1.8% sales jump in September.
A substantial contributor was the 2.5% increase in auto sales, which followed a 0.8% rise in March. It was the best showing for auto sales since a 4.2% surge in December, a month when dealers offered attractive year-end incentives in an effort to clear out a backlog of unsold cars.
But even excluding autos, consumer demand was strong last month, rising 1.1%, far above the tiny 0.2% March increase in retail sales excluding autos.
Analysts said with employment rising, consumers will be able to keep spending in the months ahead. Consumer spending is closely watched because it accounts for two-thirds of total economic activity.
For April, sales at clothing stores rose 2.8% after having fallen by 2.2% in March. It was the biggest increase since a 5.2% surge in October 2002.
Sales at department stores rose 1.3% following a 2% decline in March.
Also enjoying sales gains were hardware stores, up 1.2%; health care stores, up 0.7%; and gasoline service stations, up 1.9%, a gain that primarily reflected higher gasoline prices.
Appliance and electronic stores saw a 0.1% drop in sales, and sales were down 0.3% at sporting goods, hobby, book, and music stores.
Restaurants and bars saw a 0.9% increase in sales while grocery stores saw sales increase 0.6%.