U.S. Retail Sales Rose 0.4% in April--Update

By Ben Leubsdorf Features Dow Jones Newswires

Retail sales improved in April, suggesting stronger U.S. consumer spending this spring that should bolster broader economic growth as unemployment stays low.

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Sales at U.S. stores, restaurants and online retailers increased a seasonally adjusted 0.4% in April from the prior month, the Commerce Department said Friday. Economists surveyed by The Wall Street Journal had expected a 0.5% gain.

It was the strongest sales gain in three months, and came with positive revisions to earlier data. March sales rose 0.1%, and sales in February were down 0.2%.

"Consumer spending follows income and income follows employment and...there is every reason to believe consumer spending will continue to trend up as the year moves forward," said Steven Blitz, chief U.S. economist at TS Lombard, in a note to clients. Excluding sales of motor vehicles and auto parts, sales rose 0.3% in April from the prior month; economists had expected a 0.5% rise. Excluding both autos and gasoline, sales also were up 0.3% last month compared with March.

Compared with a year earlier, total sales in April rose 4.5%. The figures weren't adjusted for inflation, but annual sales growth comfortably exceeded year-over-year growth in consumer prices.

Friday's report excluded consumer spending on most services, including medical care and housing.

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The U.S. economy stumbled in early 2017. Gross domestic product, a broad measure of the goods and services produced across the nation, expanded at a weak 0.7% seasonally adjusted annual rate in the first quarter, according to the Commerce Department.

The deceleration in overall growth reflected a sharp slowdown in consumer spending, which accounts for the majority of total economic output. Household outlays on both goods and services expanded at a 0.3% pace in the first three months of the year, the weakest quarterly reading since late 2009. Car sales dropped, Americans spent less on home heating due to mild winter weather, and some households experienced delays in receiving tax refunds from the Internal Revenue Service.

Many forecasters predicted household spending would accelerate this spring, based on underlying health in the economy. The unemployment rate in April was 4.4%, according to the Labor Department, matching its lowest level since 2001. Gauges of consumer and business confidence remain high following last year's presidential election.

Friday's data on retail sales "provide further reason to expect that overall real consumption growth will be much stronger in the second quarter," said Andrew Hunter, U.S. economist at Capital Economics, in a note to clients.

The Federal Reserve, in a policy statement last week, said that "the fundamentals underpinning the continued growth of consumption remained solid." Looking at the overall economy, the U.S. central bank said it "views the slowing in growth during the first quarter as likely to be transitory."

Still, retail chains have announced thousands of store closures so far this year, and some have filed for bankruptcy protection, as U.S. shoppers increasingly shift their spending to online platforms from physical storefronts and malls.

Macy's Inc. on Thursday said sales at stores open at least a year fell 5.2% from a year earlier in the quarter ended April 29, and Kohl's Corp. said its same-store sales were down 2.7%.

Kohl's Chief Executive Kevin Mansell said soft sales in February were a bit of an anomaly, perhaps the result of slower-than-usual receipt of tax refunds, and noted that business improved in March and April.

"I'm sort of putting February to the side," Mr. Mansell said. "And I think March/April is probably the way we're considering our business trend."

Friday's report showed that in April, nonstore retailer sales -- a category that includes online shopping -- jumped 1.4% from the prior month, while sales at department stores rose a more modest 0.2% from March. Over the past year, nonstore sales rose 11.9% and department-store sales fell 3.7%.

Like other retailers, HSN -- the former Home Shopping Network -- has seen customer behavior change in recent years. President Bill Brand said in an interview about half of HSN's sales now come via the web and mobile devices.

"Maybe fewer people are watching TV, and how they're consuming content is different than they have in the past," he said.

Spending was uneven across retail categories last month. Sales fell 0.4% at grocery stores and rose 0.4% at restaurants and bars. Sales were up at gasoline stations and building-materials stores, but fell at furniture and clothing stores.

Suzanne Kapner contributed to this article

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com

(END) Dow Jones Newswires

May 12, 2017 10:03 ET (14:03 GMT)