Retail Sales Unexpectedly Make Small Gains

Retail sales unexpectedly rose in April as households bought automobiles, building materials and a range of other goods, pointing to underlying strength in the economy.

The Commerce Department said on Monday retail sales edged up 0.1% after a revised 0.5% decline in March.

Economists polled by Reuters had expected retail sales, which account for about 30% of consumer spending, to drop 0.3% last month after a previously reported 0.4%decline in March.

So-called core sales, which strip out automobiles, gasoline and building materials and correspond most closely with the consumer spending component of gross domestic product, increased 0.5%after nudging up 0.1% in March.

The increase in core sales, coming on the heel of relatively strong job growth over the last three months, should help to ally fears of an abrupt slowdown in the economy early in the second quarter even as government austerity is starting to put a strain on manufacturing.

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Housing a Driver for Retail

The tone of the retail sales report was mostly firm. Receipts at auto dealerships rose 1.0% after falling 0.6%in March. Excluding autos, sales dipped 0.1%after falling 0.4% in March.

Though falling gasoline prices pushed down receipts at gasoline stations, sales excluding gasoline recorded their largest increase since December.

Stripping out gasoline and autos, sales rose 0.6%.

Sales at building materials and garden equipment suppliers increased 1.5%, the largest gain since September. That reflects gains in homebuilding as the housing market recovery gains momentum.

Receipts at clothing stores rose 1.2%, the biggest increase since February last year.

Sales at sporting goods, hobby, book and music stores gained 0.5%. Receipts at electronics and appliances stores increased 0.8%, while sales at furniture stores were flat.