April sees retail sales rebound, signaling economic steadiness

Retail sales in the US climbed by 0.4% in April, surpassing the predicted rise of 0.8% according to economists in a Wall Street Journal poll. Retail sales are considered a significant indicator of economic strength and account for a considerable portion of consumer spending. Prior to April’s increase, sales had fallen in four of the past five months. Sales of new cars and auto parts increased by 0.4%, while gas station sales dropped by 0.8% as Americans drove less due to surging oil prices. Excluding car dealerships and gas stations, retail sales increased by 0.6%.

Most of the rise in retail sales was experienced by a few categories, such as internet retailers, mass merchandisers, and home improvement stores including Home Depot and Lowe’s. Nevertheless, most other major retail categories saw sales declines. Economists are closely monitoring bar and restaurant sales, the only service sector measured in the retail report, as these sales usually decline during times of economic recession.

Although retail sales have improved, they are unlikely to mark the start of a sustained upward trend, given the interest rate hikes implemented by the Federal Reserve to slow down the economy and curb consumer appetite for high-priced items. However, a strong labor market and increasing incomes will probably keep consumer spending high, except during a recession.

Sal Guatieri, senior economist at BMO Capital Markets, believes that consumers are underperforming, despite high borrowing costs and tighter borrowing standards. Conversely, Bill Adams, chief economist at Comerica, suggests that consumer spending may pose opposition to economic growth in 2023. The Dow Jones Industrial Average and S&P 500 were predicted to open lower in Tuesday’s trading.

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