U.S. April Retail Sales Rise 1.4%, More Than Forecast (Update1)
*Comments: Break out the CHARGE cards!!!... Did retail sales really rise or did consumer debt rise!?...
May 12 (Bloomberg) -- U.S. retail sales rose more than forecast in April and by the most in seven months, suggesting stronger consumer spending provided a lift for the economy at the start of the second quarter.
The 1.4 percent rise, double the median estimate in a Bloomberg News survey, reflected higher receipts at gas stations and greater demand for automobiles and clothing. March sales rose 0.4 percent, more than reported last month, the Commerce Department said today in Washington. Excluding auto dealers, purchases rose 1.1 percent last month after rising 0.2 percent.
Employment growth, increases in worker earnings and longer hours on the job are giving Americans the means to spend even as costlier fill-ups at the gas pump take more of their paychecks. Excluding autos, gasoline and building materials, a figure the government uses for its growth estimate, purchases accelerated.
``There's no break in the buying habits of consumers,'' said David Resler, chief economist at Nomura Securities International in New York. ``There's sufficient employment growth to be generating a lot of income for a lot of people.''
Sales excluding autos, gasoline and building materials, used in calculating gross domestic product, jumped 1 percent last month, the biggest rise since September, after a 0.3 percent drop in March. The government uses data from other sources to calculate the contribution from autos, gasoline and building materials.
Higher costs for fuel and other raw materials are keeping companies focused on holding down expenses. First-time claims for jobless benefits rose 4,000 last week to 340,000, suggesting improvement in the labor market will be gradual, Labor Department data showed today. Claims are averaging 327,000 this year, down from the average in 2004.
Biggest Rise Since September
The April sales increase was the biggest since a 1.8 percent jump in September. Economists expected overall sales to rise 0.7 percent after a previously reported 0.3 percent increase in March, according to the median of 71 forecasts in a Bloomberg News survey. Forecasts ranged from gains of 0.4 percent to 1.5 percent. Excluding automobiles, sales were expected to rise 0.5 percent after an initially reported 0.1 percent March gain.
Treasury yields rose after the data suggested faster economic growth will keep Federal Reserve policy makers on a path of higher interest rates. The 4 percent Treasury note maturing in February 2015 declined 7/32, pushing up the yield 3 basis pints to 4.23 percent, at 8:37 a.m. in New York.
Federal Reserve Bank of St. Louis President William Poole yesterday said that ``economic conditions improved dramatically in April.''
Seasonal Effect
The way the government adjusts its data to account for sales around holidays may have affected the way sales were calculated in March and April, some economists said. Sales typically increase around Easter.
Because the Easter holiday occurred in March, the Commerce Department's adjustment process may have depressed sales during that month and overemphasized the rebound in April, some economists said.
The government ``systematically over-adjusts around Easter sales,'' Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut, said before the report. Excluding Easter and the warmer weather, while ``there is no question gas prices must be having some negative effect on the consumer, the impact itself is pretty modest,'' he said.
Retail sales are about half of all consumer spending, which in turn accounts for about two-thirds of the economy.
Auto Sales
Sales at automobile dealerships and parts stores increased 2.5 percent last month after rising 0.8 percent in March. Automakers sold cars and light trucks at a 17.5 million annual pace last month, up from 16.8 million in March and 16.6 million a year earlier, according to industry figures released May 3.
Sales at filling stations rose 1.9 percent last month following a 2.2 percent increase in March. The average price of all grades of gasoline at the pump was a record $2.321 a gallon in the week ended April 11, according to the Department of Energy. Prices have since fallen, averaging $2.23 a gallon in the week ended May 9.
``None of us can ignore the fact that gas at over $2.50 a gallon is going to affect the average consumer,'' James Keyes, chief executive of 7-Eleven Inc., said in an interview. 7-Eleven said on May 10 that sales at stores open at least a year rose 5.7 percent in April from a year earlier.
Building Materials
Wal-Mart Stores Inc., the world's largest retailer, said today that first-quarter profit was below analysts' estimates because higher fuel prices hurt sales.
Stores selling building materials and garden supplies showed a 1.2 percent increase in sales last month following a 1.9 percent rise in March.
Consumer spending, which accounts for two-thirds of economic growth, will probably grow at a 3.1 percent annual pace this quarter after a 3.5 percent increase in the first three months, according a separate survey of economists from April 29 to May 6.
Expectations that consumers and businesses are limiting their spending prompted economists to lower their second-quarter growth forecasts to a median of 3.2 percent, from the 3.7 percent projected last month.
Department Stores
Sales at general merchandise stores, including department stores, rose 1.5 percent last month after falling 0.7 percent. Sales at clothing and accessory stores increased 2.8 percent, the most since October 2002, after a 2.2 percent decline. Those as department stores rose 1.3 percent, following a 2 percent decrease.
April sales at stores open at a least a year rose 2.2 percent from a year earlier, the International Council of Shopping Centers said on May 5. The sales figure is not adjusted for seasonal variations.
The average monthly sales gain in the 12 months ended in April was 3.8 percent, according to the ICSC.
Spending in March may also have been hampered by storms early in the month in the Northeast, economists said. April was warmer than average for most of the U.S. and precipitation was near average, according to the National Climatic Data Center in Asheville, North Carolina. That may have helped bring customers into the stores, economists said.
Electronics
Sales at electronics and appliance stores fell 0.1 percent, while furniture sales rose 0.1 percent, the Commerce Department's report showed. Purchases at sporting goods, hobby, book and music outlets declined 0.3 percent while sales at food and beverage stores rose 0.7 percent. Sales at restaurants and drinking places rose 0.9 percent.
Sales at Domino's Pizza Inc. rose 16 percent to $369.7 million in the first quarter from $318.8 million a year earlier, the pizza delivery chain said on May 10. Sales at stores open at least a year rose about 11 percent.
``This could very well be the strongest same-store sales performance we've ever had,'' Domino's Chief Executive David Brandon said in an interview on May 10.
Non-store retailers, which include online purchases and catalog sales, rose 0.4 percent in April after a 1.8 percent increase a month earlier.
U.S. employers added 274,000 workers in April, more than economists expected, after 146,000 in March, the Labor Department said May 6. Average earnings per week rose by $4.88 to $542.40, or 0.9 percent more than in March. The percentage increase was the biggest since August 1997. An index of weekly hours worked, also rose 0.9 percent, the most since February 1997.
To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net
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