Weak U.S. retail sales point to slowing economy
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WASHINGTON (Reuters) – U.S. retail sales unexpectedly fell in April as households cut back on purchases of motor vehicles and a range of other goods, pointing to a slowdown in economic growth after a temporary boost from exports and inventories in the first quarter.
Automobiles are shown for sale at a car dealership in Carlsbad, California, U.S. May 2, 2016. REUTERS/Mike Blake/File Photo
The economy’s outlook was also dimmed by other data on Wednesday showing a decline in industrial production last month. The weak reports came in the midst of an escalating trade war between the United States and China, which has triggered a massive stock market sell-off.
Economists have warned the trade tensions could undercut growth. Following the retail sales report, some economists trimmed their second-quarter growth estimates.
The Commerce Department said retail sales slipped 0.2% last month. Data for March was revised slightly up to show retail sales surging 1.7%, the largest increase since September 2017, instead of the previously reported 1.6% jump.
U.S. financial markets were little moved by the data.
Excluding automobiles, gasoline, building materials and food services, retail sales were unchanged in April after an upwardly revised 1.1% acceleration in March. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
They were previously reported to have soared 1.0% in March. Consumer spending accounts for more than two-thirds of economic activity. While March’s strong core retail sales set consumer spending on an upward trajectory in the second quarter, last month’s weakness suggested the pickup in consumption could be moderate.
Morgan Stanley cut its consumer spending growth estimate for the second quartet to a 1.6% annualized rate from a 2.0% pace. The bank lowered its second-quarter GDP growth estimate to a 1.2% rate from a 1.5% pace.
Consumer spending grew at a 1.2% annualized rate in the first quarter, the slowest in a year. The economy grew at a 3.2% pace in the January-March quarter. The economy is losing momentum in part as the boost from last year’s $1.5 trillion tax cut package fades.
Sales at building materials and garden equipment and supplies dealers tumbled 1.9%. Receipts at clothing stores slipped 0.2%, likely reflecting deep price discounting by retailers trying to work off excess inventory. Households also spent less on personal grooming.
Sales at furniture outlets were flat. But receipts at service stations increased 1.8%, likely boosted by more expensive gasoline. Receipts at hobby, musical instrument and book stores gained 0.2% percent.
Sales at bars and restaurants climbed 0.2 percent.
In another report on Wednesday, the Federal Reserve said industrial production fell 0.5% in April after rising 0.2% in March. Manufacturing output dropped 0.5 percent last month after being flat in March.
Reporting by Lucia Mutikani; Editing by Andrea Ricci