U.S. retail sales rise in April, consumer spending likely to rebound in Q2

U.S. retail sales rose in April, coming in line with expectations. The advance Census Bureau report showed that retail sales rose 0.3 percent in the month. The healthy gain came after a blowout upward revision to the March tally, which was now recorded as a rise of 0.8 percent.

Sales at motor vehicle & parts dealers rose just 0.1 percent, whereas gasoline station sales grew strongly by 0.8 percent. Taken together, the two largely matched the gains elsewhere, with the measure that excludes autos and gas also up 0.3 percent.

Building materials recorded a decent growth of 0.4 percent, but spending at eating and drinking place sales dropped for the first time in seven months. Stripping gas, autos, building materials, and food services, the ‘control group’ used in calculating GDP was up 0.4 percent. Apart for the decline in health store spending and a slightly lower spending at electronics and sporting goods stores, the remaining categories saw gains, with clothing and miscellaneous stores, leading the pack.

Today’s report confirms the projections of a rebound in consumer spending in the second quarter after a subdued report in the first quarter, noted TD Economics in a research report. Spending might rose by almost 3 percent, aiding along the economy to rise by a similar magnitude.

“This will be a positive signal for the FOMC, with many members of the committee expecting that the Q1 weakness was transitory. As such, the report further solidifies the expectations for a June rate hike, with at least one other hike (and perhaps two) likely in the second half of the year”, added TD Economics.

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