United States retail sales increased for a third consecutive month in April, supported by larger tax refunds and strong stock market gains, although economists warned rising inflation pressures could weaken consumer spending later in the quarter.
Data released on Thursday showed part of the increase in spending reflected higher prices following the escalation of the U.S.-Israel conflict involving Iran, which has disrupted shipping through the Strait of Hormuz and lifted energy and commodity costs globally.
According to the Commerce Department’s Census Bureau, retail sales rose 0.5% in April following a downwardly revised 1.6% increase in March. The result matched market expectations and followed a previously reported 1.7% rise in March.
The figures also highlighted what economists describe as a “K-shaped” economy, where wealthier households continue to spend comfortably while lower-income consumers face growing financial strain.
The latest retail sales, inflation and labour market data reinforced expectations in financial markets that the Federal Reserve is likely to keep its benchmark interest rate within the 3.50% to 3.75% range into next year.
ANZ analysts said in a note to clients: "Given high inflation, real or volume retail sales will have been significantly weaker. It is early to postulate, but given stretched affordability, high gasoline prices and the likelihood that the boost to consumption from record tax rebates is receding, we remain cautious on the outlook for consumer activity. Record low consumer sentiment in the University of Michigan survey corroborates that assessment.
"Demand-pull inflation pressures are weak and most of the inflation is down to exogenous supply-side developments."
The conflict involving Iran has significantly disrupted shipping in the Strait of Hormuz, increasing the cost of energy and other commodities, including fertiliser and aluminium.
Electronics and appliance stores led April’s gains, with receipts rising 1.4%.
Sales at nonstore retailers, including online merchants, increased 1.1%, while receipts at gasoline stations climbed 2.8% after surging 13.7% in March.
Consumers also continued discretionary spending, with sales at sporting goods, hobby, musical instrument and book stores jumping 1.4%.
Receipts at food services and drinking places, regarded as an important indicator of household financial conditions, increased 0.6%.
However, several retail categories weakened during the month. Sales at clothing and accessories stores fell 1.5%, while furniture and home furnishing store receipts declined 2.0%. Sales at auto dealerships slipped 0.4%.
Core retail sales, which exclude automobiles, gasoline, building materials and food services and closely align with the consumer spending component of gross domestic product, rose 0.5% in April following an upwardly revised 0.8% gain in March. The March figure had previously been reported as a 0.7% increase.
