Consumers are still in somewhat of a buying frame of mind, apparently, as the Commerce Department earlier this morning reported that retail sales rose by 0.5% in April, in the aggregate. That increase, however, was a tenth of a percentage point less than the consensus of economists had expected. Also, sales for March, originally estimated to have climbed by a modest 0.4%, were upwardly revised to show a much more formidable increase of 0.9%. That more solid late first-quarter gain augurs well for an upward revision in the tepid first-quarter gross domestic product growth tally of 1.8%. Yesterday's report of a sharper-than-expected increase in the international trade deficit, by comparison, will have a negative effect on the opening-quarter GDP revision set for release later this month.
Meanwhile, in this report, we saw that sales rose by 0.6%, if we back out motor vehicle and parts sales. This so-called core retail sales increase in April, was six tenths of a percentage point less than the March estimated gain in this category. Here, too, the core rate in March was revised upward from an initial estimated increase of 0.8% to a gain of 1.2%. However, in a more sobering statistic, if we back out sales at gasoline stations alone, we find that sales, in the aggregate, rose by only 0.2% last month.
Individually, the report showed that auto vehicle and parts sales inched up by just 0.2% last month. More meaningful contributors to the overall advance in consumer activity in April included a 2.7% surge in gasoline sales, which, obviously, was notably affected by the higher prices for that commodity. Food and beverage stores saw a sharp increase as well, with such sales soaring by 1.2% last month; grocery store sales rose even more sharply, gaining 1.5%. Two factors may well have been at work here, namely higher food prices and a movement among more hardpressed consumers to eat more frequently at home instead of at more costly restaurants. Other notable sales gainers last month included miscellaneous store retailers and non-store retailers.
Among those sectors still feeling the pain of the lingering effects of the earlier recession, we saw declines in sales at furniture and home furnishing stores, which is not surprising given the weak state of the housing industry, and a sharp drop in sales at electronic and appliance retailers. The drop in appliance store sales was likely also occasioned by the ongoing weak performance in the housing market.  Finally, sporting goods, hobby, book, and music retailers all saw a declining sales pattern, as well. Conversely, clothing and accessories retailers did a bit better than the month before, with sales up slightly in April.
On the whole, it was a decent report, although our optimism regarding this critical sector is tempered somewhat by the realization that inflation played a large role in the latest figures. Save for the runup in prices, which we saw today in the Labor Department's report on producer or wholesale inflation in April, the retail gains would presumably have been materially less. The rising prices for food and gasoline are also obviously putting a damper on consumer spending. In sum, then, this was a mixed report, and it clearly suggests that economic growth in the current quarter, albeit likely to be notably better than in the opening period, may not rise above 3%, as some are now bravely forecasting.   

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.