Higher gasoline prices flatter US retail sales

WASHINGTON, Apr 17 (Reuters): US retail sales increased solidly in March, boosted by record- high gasoline prices, but consumers are starting to feel the pinch of high inflation, with online spending posting back-to-back declines for the first time in more than a year.
The report from the Commerce Department on Thursday, which also showed stronger retail sales growth in February than initially thought, suggested consumer spending picked up in the first quarter, helping to underpin the overall economy.
A tightening labor market, which is driving up wages, and massive savings accumulated during the pandemic are providing some cushion against inflation. Annual inflation surged by the most in more than 40 years in March, though there are signs price pressures have peaked and should start to gradually abate.
"The report still reveals the resilience of consumer spending," said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina. "There is no doubt households are feeling the pinch from skyrocketing prices across an array of products. But there are signs that pandemic-related inflation is beginning to ease."
Retail sales rose 0.5 per cent last month. Data for February was revised higher to show sales increasing 0.8 per cent instead of 0.3 per cent as previously reported. Economists polled by Reuters had forecast retail sales climbing 0.6 per cent, with estimates ranging from as low as a 0.3 per cent decline to as high as 2.2 per cent jump.
Retail sales, which are mostly goods, advanced 6.9 per cent on a year-on-year basis. They are not adjusted for inflation.
Retail sales
Sales at service stations shot up 8.9 per cent, accounting for the bulk of the increase in sales in March. Monthly consumer prices increased by the most in 16-1/2 years in March as Russia's war against Ukraine boosted the cost of US gasoline to record highs. Prices at the pump on average soared to an all-time high of $4.33 per gallon in March, according to AAA.
Excluding gasoline, retail sales fell 0.3 per cent.
Though gasoline prices have since retreated to an average of $4.074 per gallon, high inflation is likely to prevail. A separate report from the Labor Department on Thursday showed import prices jumped 2.6 per cent last month, the largest rise since April 2011, after increasing 1.6 per cent in February.
Stocks on Wall Street were lower. The dollar rose against a basket of currencies. US Treasury prices fell.
Soaring prices are reducing consumers' purchasing power, but rising wages are helping to blunt some of the hit. The unemployment rate is at a two-year low of 3.6 per cent and there were a near-record 11.3 million job openings at the end of February, making it easier for some cash-strapped Americans to take a second job or pick up extra shifts.
Consumers also accumulated more than $2 trillion in excess savings during the COVID-19 pandemic.
A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits increased 18,000 to a still-low seasonally adjusted 185,000 for the week ended April 9. Economists had forecast 171,000 applications for the latest week.