Economists attribute the apparent cooling of retail sales in April to seasonable weather and rest by the buyers after enormous pre-Easter vacation shopping spree. These comments come just at a time when investors are eagerly waiting for this week’s CD report.
US economy, US retail sales, economists, Easter vacations, pre-Easter vacations
The estimated 0.2% increase is expected to follow a 0.8% gain in March. This is according to the latest survey by Bloomberg. Other reports indicate a lower cost of living, stable home construction, and increasing production output. About 68 economists were interviewed during this survey.
Demand for building materials, clothing and furniture possibly suffered in April compared with a three months gain that was largely induced by the hot weather. The slight improvement in employment also makes it hard for buyer spending to go with last quarter’s improvement, the greatest in one year.
Paul Dales notes that domestic spending is fairly healthy although not at an impressive rate. He adds that things are not really bad for now.
This slowdown in retail sales may be partly attributed to seasonal occasions that dragged sales into the preceding month. March was the hottest month on record, while Easter came on 8th unlike like in 2011 when it fell on 24th.
Pressure on Growth
By excluding auto dealers and service stations along with construction material stores from the retail sales group that helps in calculating GDP, it is likely to see 0.4% increase in April, which is similar to the previous month.
Reports from Commerce Department indicate that consumer spending climbed at the rate of 2.9% in the initial quarter, which is the highest since the last quarter of 2010.
Low employment rate makes it hard for consumers to continue spending at such rates. Only 115,000 jobs were created last month, the smallest since October. Redundancy dropped as people went out the labor force.
According to a report from the AAA, cheaper gasoline will help consumers to save more cash to buy other items and services. The cost of regular gas dropped to $3.73 from $3.94 per gallon.
The drop in the cost of fuel is also being evidenced by inflation. According to the survey, consumer-price indicator changed slightly in April after it shot up by 0.3% the previous month. Prices increased by 2.3% in the last one year, from 2.7% in March.
Retreating inflation makes the Fed’s policy makers to show no sign of increasing borrowing costs. The minutes for the last meeting are expected to be published on May 16th. During this meeting the policymakers emphasized the need to keep interest rates low until the late 2014.