Fri, 09 Jun 2023

US officials hopeful as retail sales rise in April

Robert Besser
21 May 2022, 05:40 GMT+10

WASHINGTON D.C.: U.S. retail sales rose strongly in April, as consumers bought more motor vehicles and spent more at restaurants, boosting the U.S. economy at the start of the second quarter.

Reported by the Commerce Department this week, the overall rise in retail sales suggested demand was holding strong, despite high inflation and rising interest rates, as well as having the effect to calm fears of an imminent recession.

Data showing production at factories accelerated in April also highlighted the economy's underlying strengths.

A high demand for workers is also causing rising wages, and savings accumulated during the COVID-19 pandemic are underpinning spending.

"The strong retail sales should limit concerns over downside risks to growth and keep Fed officials firmly focused on raising interest rates to address too-high inflation," noted Matthew Massicotte, economist at Citigroup in New York, as reported by Reuters.

"At some point, rising prices will dampen consumer demand and slow inflation, but for now the strong tailwind from nominal income growth and available consumer credit is driving demand," he added.

Last month, retail sales rose 0.9 percent, mostly comprised of goods and not adjusted for inflation, which appears to have peaked. Consumer price inflation increased 8.3 percent year-on-year in April.

With a record 11.5 million job openings at the end of March, wages are rising and allowing consumers to take a second job or pick up extra shifts, offering a cushion against inflation.

But retail sales are expected to slow later this year due to the aggressive monetary policy of the Fed, which has raised its policy interest rate by 75 basis points since March and is expected to hike that rate by half a percentage point in June and July.

The growth in sales was lauded by the National Retail Federation, but it urged the White House and the U.S. Congress to lift tariffs on Chinese goods, pass legislation to fix the supply chain and address immigration reform to ease the tight labor market.

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