U.S. retail sales unexpectedly declined in April for the second time in three months, weighed down by soft sales of autos and building materials and suggesting consumer spending will remain subdued this quarter.
The value of overall sales declined 0.2% after a 1.7% increase the previous month that was the strongest gain since 2017, according to Commerce Department figures released Wednesday. That compared with the median forecast in Bloomberg's survey calling for a 0.2% rise.
Sales in the "control group" subset, which some analysts view as a cleaner gauge of underlying consumer demand, were unchanged from the previous month, below projections for a 0.3% gain. The measure excludes food services, car dealers, building-materials stores and gasoline stations.
Economists are having a difficult time gauging the mood of consumers this year. Retail sales have been on a seesaw pattern, rising at a healthy pace in January, then falling in February, followed by the big jump in March and now a drop in April. The roller-coaster pattern may partly result from the government shutdown in January, which disrupted the collection of economic data.
Still, analysts said the jump in March retail sales means that even after April's small decline, sales are rising over time at a decent pace. Steady job gains and solid hiring likely will underpin future spending.
"The report is disappointing but far from a disaster," Sal Guatieri, senior economist at BMO Capital Markets, said. "Though losing momentum amid fading support from tax cuts, consumer fundamentals remain supportive, suggesting households will pick up the pace in coming months."
The April figures, also reflecting weakness in the category that includes online sales, suggest spending remains soft after the weakest quarterly increase in a year. That could bolster pressure from President Donald Trump and financial markets to cut borrowing costs as inflation unexpectedly stays low, though Federal Reserve policymakers have pledged patience as steady job and income gains should support purchases in coming months.
The retail report followed another round of downbeat data from the Fed showing U.S. factory production fell in April for a third time in four months with a broad decline led by weakness in machinery and motor vehicles. The cooler readings on the world's largest economy followed reports from China that industrial output, retail sales and investment all slowed more than economists forecast in April, underscoring challenges to global growth from Trump's widening trade war.
The U.S. retail data are "a bit of a downer for the near-term economic outlook but do not move the big picture needle much," Stephen Stanley, chief economist at Amherst Pierpont Securities, said in a note. Recent seesaw patterns suggest there could be a "powerful bounce-back in May," he said.
Retailers may be poised to take a further hit should Trump follow through on his threat to impose tariffs of 25% on almost all remaining Chinese imports, which would probably eventually force Americans to absorb higher prices.
The weakness in sales last month was broad. Sales at clothing stores fell 0.2% and plunged 1.9% at home and garden supply stores. Furniture store sales were unchanged.
Other declining sectors included health and personal care, electronics and appliances. Sales at automobile dealers fell 1.1%, the most since January, after increasing 3.2% in the previous month. Industry data from Wards Automotive Group previously showed unit sales retreated in April, touching the lowest level since 2017.
Categories with increases included general merchandise, food and beverage stores, and restaurants and bars, which Guatieri said is a positive sign because restaurant spending is discretionary and suggests consumers are still confident.
Gas-station receipts increased 1.8%, the report showed, as oil prices rallied. The figures aren't adjusted for price changes, so higher retail sales in the category could reflect higher gasoline costs, sales, or both.
The retail-sales data capture just under half of all household purchases and tend to be volatile. April personal-spending figures, which detail consumer purchases, will offer a fuller picture of U.S. consumer spending at the end of the month.
Information for this article was contributed by Reade Pickert of Bloomberg News and by Christopher Rugaber of The Associated Press.
Business on 05/16/2019