NEW YORK (CNN/Money) - Retail sales jumped in the United States in April, the government said Tuesday, as consumers continued to spend in the early stages of a recovery from the economy's first recession in a decade.
The Commerce Department said retail sales rose 1.2 percent last month to $300.3 billion after a 0.1 percent increase in March. Excluding volatile automobile sales, retail sales still rose 1.0 percent, compared with a gain of 0.3 percent in March. Both readings easily topped forecasts by Wall Street economists.
The gain in total sales was the biggest since last October, the department said.
"This is a series that bounces around from one month to the next. There's enormous potential for particular incidents -- the weather, the timing of Easter, the release of a new movie -- to push retail sales around from one month to the next," Bill Cheney, chief economist at John Hancock Financial Services, told CNNfn's CNNmoney Morning program.
"But you have to come back to the fact that another good month is another good month," Cheney added. "And that is good news for the economic recovery."
U.S. stock prices surged at the opening, buoyed by the report, while Treasury bond prices fell.
Consumer spending is critical to the economy's health, making up about two-thirds of total gross domestic product (GDP), the broadest measure of economic strength.
The Federal Reserve cut its target for short-term interest rates 11 times in 2001 to lower the cost of borrowing, giving people more money to spend. In response, consumers kept spending despite a recession that began in March 2001, more than a million job cuts, falling stock prices, and the Sept. 11 terrorist attacks.
That resilience helped make the latest recession -- and some economists wonder if that term even applies to the downturn -- one of the mildest and shortest on record.
The Fed on hold
The continuing strength of consumer spending is threatened somewhat by a still-growing unemployment rate. Unemployment is a lagging indicator, often rising even as the economy improves because businesses are slow to hire new workers until they're sure the recovery is real.
And the robust productivity of U.S. businesses is another disincentive to hiring, since companies have learned to make more goods with fewer workers. But that's also helped keep prices low, and inflation at bay, meaning the Fed could keep short-term interest rates close to rock bottom for much of the year, or at least until the labor market stabilizes.
| |
Related links
| |
| | |
| | |
|
"As long as unemployment is relatively high ... the Fed is under no pressure to start tightening," Cheney said. "Right now, you have to think they've really won the war on inflation -- they're at least as worried about deflation as inflation at this point. They're not going to do anything that would jeopardize this recovery right now."
In its report, the department said the biggest component of retail sales, auto and auto-parts sales, rose 1.9 percent to $72.4 billion after falling 0.8 percent in March.
Spending on building material and garden supplies rose 2.7 percent after rising 1.7 percent in March, while health and personal care store sales rose 1.9 percent after falling 0.5 percent in March. Higher gasoline prices led to a 2-percent gain in sales at gas stations following a 4-percent gain in March.
Sales at food and beverage stores fell 0.2 percent after slipping 0.2 percent in March.
Economists said unusually cold weather and other seasonal factors could have led to some of the weakness in March sales.
|
