Buyers bumped up sales in April
Posted on Wednesday, May 14, 2008
URL: http://www.nwanews.com/adg/Business/225695/
Soaring fuel bills and a deteriorating job market didn’t stop U. S. consumers from spending last month.
Retail sales excluding cars rose 0. 5 percent in April, more than twice what economists had forecast, according to a Commerce Department report released Tuesday in Washington. Including autos, total purchases slipped 0. 2 percent. The Labor Department said the cost of imported goods rose 1. 8 percent, led by rising prices for fuel and metals.
“The worst fears are not being realized,” said Jay Feldman, an economist at Credit Suisse Holdings Inc. in New York. “We still think growth is going to be soft,” though tax rebates distributed by the government in its stimulus package may “keep us above water,” he said.
On Wall Street, the Dow Jones industrial average fell 44. 13, or 0. 34 percent, on Tuesday to 12, 832. 18. The Standard & Poor’s 500 consumer discretionary stock index closed up 0. 2 percent at 259. 88.
Treasuries fell after the sales report indicated consumers are weathering record costs for gasoline, a slide in home values and declines in payrolls. Tuesday’s figures offered a sign the economy may skirt a contraction this quarter and reinforced speculation that the Federal Reserve has finished lowering interest rates after seven reductions since September.
The decline in total retail sales matched the median forecast of 76 economists in a Bloomberg News survey. Excluding automobiles, sales were projected to increase 0. 2 percent. Economists forecast import prices would rise 1. 6 percent.
Separate figures released Tuesday showed that inventories at U. S. businesses rose less than forecast in March, a sign companies were preparing for weakening demand. The 0. 1 percent increase in the value of unsold goods at factories, retailers and wholesalers was the smallest since March 2007, the Commerce Department reported. Retail purchases of housingrelated items, such as building materials, furniture and appliances, gained in April. The 1. 9 percent jump in demand at suppliers of building
materias the biggest since May 2007. Restaurant sales rose 0. 9 percent, the most this year. Excluding autos, gasoline and building materials, the category that the government uses to calculate gross domestic product, sales climbed 0. 4 percent, matching the previous month’s performance. The government uses data from other sources to calculate the contribution from the three categories excluded. Purchases at automobile dealerships and parts stores dropped 2. 8 percent, the most since June, after a 0. 5 percent decrease in March. Industry figures last week showed cars and light trucks sold at an annual pace of 14. 4 million in April, the fewest in almost a decade.
Filling station sales also dropped, even as gasoline prices surged. The 0. 4 percent decrease last month followed a 1. 6 percent gain in March.
Most economists anticipate that consumer spending will slow in the second quarter, a monthly Bloomberg survey showed. The median estimate was for a 0. 5 percent annual growth rate, down from 1 percent in the first three months of 2008 and the smallest gain in almost 17 years. The group anticipated gross domestic product growth will drop to 0. 1 percent this quarter.
“Even with this rebate, I don’t think we’re going to see much on the consumer spending side,” Maury Harris, chief U. S. economist at UBS Securities LLC in New York, said in an interview with Bloomberg Television. He cited declines in indexes of consumer sentiment and falling payrolls.
Spending will rebound to a 2. 3 percent growth rate in the third quarter as the bulk of the $ 117 billion in tax-rebate checks included in a government stimulus plan are spent, the survey showed. That will be followed by a deceleration to a 1. 6 percent pace at the end the year, according to the survey.
In the two weeks since the payments started, the government sent out $ 27. 2 billion in rebates, the Treasury Department reported May 9.
Shoppers have been flocking to discount stores to stretch their paychecks and stock up on staples and gasoline. Costco Wholesale Corp., the largest U. S. warehouse-club chain, last week said April sales at stores open at least a year rose 8 percent as customers sought less-expensive clothing and discounted fuel.
Continuing price gains as oil, corn and other commodity prices soar, may prompt the Fed to keep its benchmark interest rate at 2 percent at its June 25 meeting, according to trading in the futures market.
Housing is likely to continue to be the economy’s weakest component for the rest of the year. That indicates demand for building materials, furniture and appliances may not keep growing. Information in this article was contributed by Betty Liu, Heather Burke, Alexandre Tanzi and Shobhana Chandra of Bloomberg News.