BUSINESS

US retail sales unchanged in April; slide in auto purchases offset by restaurant spending

05/13/2015 08:49 EDT | Updated 05/13/2016 05:59 EDT
WASHINGTON - U.S. shoppers kept their spending in check in April, as modest wage growth over the past year keeps family budgets tight.

The Commerce Department said Wednesday that retail sales were unchanged last month after rising 1.1 per cent in March. Sales have risen just 0.9 per cent over the past 12 months. Steady hiring has yet to spark significantly higher incomes.

The retail sales report also raises the possibility that nasty winter weather can't entirely explain the recent lacklustre consumer spending in prior months, since the anticipated spring rebound has not materialized.

"The continuing weakness of retail sales in April brings into question our working assumption that the soft patch through the winter months was largely due to the unseasonably cold temperatures in the Northeast," said Paul Ashworth, chief U.S. economist at Capital Economics.

Americans cut back on their purchases at autos dealers, furniture outlets, building supply stores, gas stations, supermarkets and department stores last month. Offsetting those declines were increases in spending at restaurants, clothiers, health-related stores and online retailers.

Excluding the volatile categories of autos, gas, building materials and restaurants, sales were flat.

Many economists say that sales should improve once the strong job growth fuels acceleration in wage growth. But the addition of 3.1 million jobs over the previous 12 months has done little to push up paychecks at a meaningfully faster pace than inflation.

Wages have risen at a relatively modest 2.2 per cent clip over the past 12 months, barely outpacing inflation, the Labor Department reported last week.

Also, gasoline prices are beginning to rise, which could cut into shopping budgets. The average cost of gas nationwide is $2.66 a gallon, up from $2.39 a month ago, according to the AAA Daily Fuel Gauge.

Prices at the pump still remain almost a dollar lower a gallon than last year. But the previous decreases in fuel costs led more Americans to pocket the savings instead of spending.

Economists watch the retail sales report closely because it provides the first indication each month of the willingness of Americans to spend. Consumer spending drives 70 per cent of the economy. Yet retail sales account for only about one-third of spending, with services such as haircuts and Internet access making up the other two-thirds.

Consumer spending increased 0.4 per cent in March, the largest gain since November, the Commerce Department reported.

The economy expanded at a meagre annual pace of 0.2 per cent during the first three months of the year. Consumer spending growth fell to just 1.9 per cent during the first quarter, down sharply from 4.4 per cent in the previous quarter.

A stronger dollar has weighed on exports, and energy firms are cutting workers and equipment orders due to cheaper oil. Meanwhile, consumer spending has failed to rise to a level to propel stronger economic growth.