US retail sales miss expectations, but remain strong

Las retail sales in the United States they rose less than expected in April, but the underlying trend was strong, suggesting that consumer spending likely remained strong early in the second quarter, despite mounting recession risks this year.

Retail sales rose 0.4% last month, the Commerce Department reported Tuesday. Data for March was revised slightly lower to show a drop in sales of 0.7%, instead of the previously announced 0.6%. Economists polled by Reuters had forecast a rebound in sales of 0.8 percent.

Retail sales consist mainly of goods, which are usually purchased on credit, and do not conform to the inflation. Food and beverage services are the only category of services in the retail sales report.

Rising retail sales added to strong job growth in April, suggesting that the economy was experiencing a spring revival after slowing activity in February and March. Spending is being supported by strong wage increases thanks to tight labor markets.

Some homes still have savings accumulated during the pandemic of COVID-19. Economists expect a recession as the cumulative and lagged effects of the Federal Reserve’s campaign of fastest interest rate hikes since the 1980s to rein in inflation begin to have a broader impact on the economy.

Banks are also tightening lending criteria, which could make credit unaffordable for some consumers.

Excluding autos, gasoline, construction materials and food services, retail sales rose 0.7% last month. Data for March was revised slightly lower to show so-called core retail sales falling 0.4% instead of the previously reported 0.3%.

Core retail sales map more closely to the consumer spending component of the gross domestic product. Consumer spending, which accounts for more than two-thirds of the American economic activityaccelerated in the first quarter, offsetting the drag on GDP growth caused by the liquidation of inventories.

The economy grew at an annualized rate of 1.1% last quarter. The Atlanta Fed currently estimates that GDP will grow at a rate of 2.7% in the second quarter.