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Automobiles power U.S. retail sales in March

Reuters  |  WASHINGTON 

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. rebounded in March after three straight monthly declines as households boosted purchases of motor vehicles and other big-ticket items, suggesting consumer spending was heading into the second quarter with some momentum.

Economists saw a limited impact on for now from a recent ebb in consumer sentiment, citing a robust labour market, which is steadily pushing up wage growth.

Consumer sentiment slipped in early April as households worried about the potential impact of the Trump administration's trade policies on the economy. Fears of a trade war between and the have roiled financial markets.

"The trade war and battered stock market may yet cause the consumer to temper their consumption expenditures, but for the moment, the sun is out and shining," said Chris Rupkey, chief at in "Consumers are doing their part to drive the economy forward as they restart their engines from a cold and snowy winter."

The Commerce Department said on Monday increased 0.6 percent last month after an unrevised 0.1 percent dip in February. January data was revised to show sales falling 0.2 percent instead of the previously reported 0.1 percent drop.

Economists polled by had forecast rising 0.4 percent in March. in March increased 4.5 percent from a year ago.

Excluding automobiles, gasoline, building materials and food services, rose 0.4 percent last month after being unchanged in February. These so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, were previously reported to have risen 0.1 percent in February.

U.S. financial markets were little moved by the data as investors watched geopolitical developments. U.S. stocks rose on waning fears that the weekend's U.S.-led missile attack on would escalate into a broader conflict. prices fell and dollar weakened against a basket of currencies.

SLOW FIRST-QUARTER SPENDING

Last month's pick-up in core did little to change expectations of a sharp slowdown in consumer spending in the first quarter.

Economists largely blame the weakness in at the start of the year on delays in processing tax refunds. Some also argue that income tax cuts, which came into effect in January, only reflected on most workers' paychecks in late February.

"The large swing in consumption between February and March is consistent with an important role for household after-tax incomes being restrained and then lifted by a unique pattern of tax refunds and withholdings," said Michael Feroli, an at in

"We believe those forces will remain supportive for consumption in the second quarter, and after today's number remain comfortable with prospects for a rebound in household outlays this quarter."

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a robust 4.0 percent annualised rate in the fourth quarter. It is expected to have slowed to below a 1.5 percent rate of increase in the first quarter.

Economic growth estimates for the January-March quarter are running below a 2 percent rate. The economy expanded at a 2.9 percent pace in the October-December quarter. The government will publish its advance estimate for first-quarter GDP growth later this month.

In March, auto sales jumped 2.0 percent, the largest increase since last September, after declining 1.3 percent in February. Sales at furniture stores climbed 0.7 percent while those at and appliance stores increased 0.5 percent.

But sales at building material stores fell 0.6 percent last month and receipts at clothing stores dropped 0.8 percent. Sales at increased 0.8 percent. Sales at restaurants and bars gained 0.4 percent. Receipts at sporting goods and hobby stores dropped 1.8 percent.

While the stock market volatility has not yet impacted on consumer spending, it is chipping away at business confidence.

In a separate report on Monday, the Federal Reserve said its index tumbled seven points to a reading of 15.8 in April. The survey's measure of future business conditions dropped to a more than two-year low.

"This month's decline in the six-month forward index may reflect trade-related uncertainties and the associated volatility of stocks, or other factors," said Roiana Reid, an at Capital Markets in

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, April 16 2018. 22:29 IST
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