Economic Watch: Retail Sales Bounce Back along with Inflation Pressures
Retail sales in the U.S. bounced back in April after falling the month before as two readings of inflation also rebounded, all raising the prospect that the Federal Reserve will increase interest rates again in June.
The 0.4% increase in retail sales fell short of Wall Street expectations of a 0.6% hike and follows an upwardly revised 0.1% decline in March. Compared to April 2016, retail sales last month moved up 4.5%, according to a Commerce Department report released Friday.
Leading the increase was a 12.3% jump in sales of gasoline from a year earlier while non-store retailers reported an 11.9% hike. In contrast, sales at department stores last month fell 0.2% from the month before but online retailers reported an increase of 1.4%, the strongest month-over-month gain of any category.
According to RBC Economics Research, spending over the last two months is in line with the view that the slowing in first quarter consumer spending growth was more the result of “normal” volatility in the data and a weather-related pull-back in utilities consumption than the beginning of a new weaker trend.
“Strong employment growth, rising wages and consumer confidence, and the still simulative stance of monetary policy [by the Federal Reserve] are all pointing to a solid household spending backdrop and the recent data remains in line with our forecast for a 2.8% increase in consumer expenditures in the second quarter that we expect will support a 2.9% increase in gross domestic product, following the surprisingly modest 0.7% annualized gain,” said Nathan Janzen, RBC senior economist.
Consumer and Wholesale Prices Rising
Meantime, separate reports show inflation is rising at both the retail and the wholesale levels, according to two separate Commerce Department reports.
The Consumer Price Index, the main gauge of retail inflation, increased 0.2% in April following a 0.3% drop in March, due in …Read the rest of this story
