US retail sales increase strongly

WASHINGTON, May 17 (Reuters): US retail sales increased solidly in April as consumers bought motor vehicles amid an improvement in supply and frequented restaurants, showing no signs of demand letting up despite high inflation.
Retail sales rose 0.9 per cent last month, the Commerce Department said on Tuesday. Data for March was revised higher to show sales advancing 1.4 per cent instead of 0.7 per cent as previously reported.
Economists polled by Reuters had forecast retail sales accelerating 0.9 per cent, with estimates ranging from as low as 0.2 per cent to as high as 2.0 per cent. Last month's increase reflects both strong demand and higher prices.
Retail sales are mostly goods, and are not adjusted for inflation, which appears to have peaked in April. Bars and restaurants are the only services category in the report.
According to the Bank of America, aggregate credit and debit card spending increased 13 per cent year-on-year in April. The bank noted that while inflation was leading to higher spending, it was "clear consumer strength goes beyond this." Consumer price inflation increased 8.3 per cent year-on-year in April.
A tight labor market is generating strong wages and allowing cash-squeezed consumers to take a second job or pick up extra shifts, providing some cushion against inflation. Households also accumulated massive savings during the pandemic, some of which are being deployed to maintain spending.
But with the Federal Reserve adopting an aggressive monetary policy stance to cool demand and bring down inflation, retail sales are expected to slow later this year. The US central bank has increased its policy interest rate by 75 basis points since March. The Fed is expected to hike rates by half a per centage point at each of the next meetings in June and July.
Excluding automobiles, gasoline, building materials and food services, retail sales increased 1.0 per cent in April. Data for March was also revised higher to show these so-called core retail sales increasing 1.1 per cent instead of 0.7 per cent as previously reported.
Core retail sales correspond most closely with the consumer spending component of gross domestic product. Last month's solid rise in core retail sales suggests that consumer spending got off to a strong start in the second quarter, a view that is supported by credit and debit card data from several banks showing increased outlays on travel and entertainment.