Energy Costs Steer Retail Sales, Wholesale Prices
The U.S. economy struggled to gain momentum early in the second quarter, with retail sales posting their smallest rise in nine months in April and wholesale prices increasing more than expected.
Other data on Thursday showed new claims for unemployment benefits fell 44,000 last week to 434,000, but they remained too high to signal a strong labor market recovery.
Retail sales increased 0.5 percent after an upwardly revised 0.9 percent gain in March as receipts at gasoline stations and grocery stores rose strongly, the Commerce Department said. Economists had expected a 0.6 percent rise.
Excluding gasoline, retail sales rose 0.2 percent.
It was the tenth straight monthly increase in sales and showed U.S. households exhibiting some resilience to lofty food and gasoline prices, which robbed spending from other areas.
"The rise in retail sales was basically related to higher gasoline prices. Overall the report was good because it was positive, but the economy and consumers are still having trouble," said Eugenio Aleman, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
Separately, the Labor Department said producer prices rose 0.8 percent in April, after a 0.7 percent rise in March. Economists had expected a 0.6 percent rise.
Financial markets showed little reaction to the economic reports. U.S. stocks were lower as falling commodity prices raised questions about the strength of the global economic recovery, while Treasury debt was little changed and the dollar was higher.
The retail data implied consumer spending, which accounts for 70 percent of U.S. economic activity, got off to slow start in the second quarter as household budgets remained stretched by high food and energy prices.
GASOLINE PRICES MAY FALL
But a recent drop in gasoline futures pointed to a fall in prices at the pump, which could ease the strain on consumers.
U.S. gasoline futures on Wednesday suffered the biggest daily drop since September 2008, with the June contract settling at $3.1228 a gallon, losing 25.69 cents, or 7.6 percent.
Consumer spending grew at a 2.7 percent rate in the first three months of 2011, braking from a 4.0 percent pace in the October-December period, according to the Commerce Department's first estimate of GDP released last month.
But upward revisions to March's figures suggested spending might have been stronger than initially thought.
That was supported by another Commerce Department report showing strong increases in business sales and inventories in March. Sales rose 2.2 percent, while inventories were up 1.0 percent.
That rise in inventories also implied first-quarter gross domestic product growth could be raised from the 1.8 percent annual pace reported by the government last month.
"Perhaps the big concern is that spending appears to have lost a lot of momentum at the start of the second quarter," said Paul Dales, a senior U.S. economist at Capital Economics in Toronto.Receipts at gasoline stations, which accounted for about 10.5 percent of overall retail sales in April, rose 2.7 percent after rising 4.1 percent the prior month.
Gasoline prices rose 24 cents or 6.6 percent to $3.85 a gallon in April from March, according to the Energy Information Administration.
SALES EX-GASOLINE TEPID
Excluding gasoline, retail sales were up 0.2 percent after rising 0.5 percent in March. Sales at food and beverage stores rose 1.2 percent after gaining 0.2 percent in March.
In the 12 months to April, overall sales were up 7.6 percent.
Sales excluding autos rose 0.6 percent last month, building on a 1.2 percent gain in March and in line with economists' expectations.
Auto sales rose 0.2 percent after declining 0.7 percent in March. Clothing store receipts rose 0.3 percent last month, while sales at building materials and garden equipment suppliers edged up 0.1 percent.
So-called core retail sales -- which exclude autos, gasoline and building materials - rose 0.2 percent after a 0.6 percent rise in March.
Core sales correspond most closely with the consumer spending component of the government's gross domestic product report. Receipts at sporting goods, hobby, book and music stores fell 1.9 percent, the largest decline since November 2009.