US retail sales, inflation data highlights sluggish Q1 growth

Consumer prices fall 0.3 pct, up 2.4% year-on-year

WASHINGTON, April 15, (RTRS): US retail sales fell for a second straight month in March and consumer prices dropped for the first time in just over a year, underscoring the magnitude of the loss of economic growth momentum in the first quarter.

But with the labor market near full employment, Friday’s weak reports failed to change views that the Federal Reserve will raise interest rates again in June. Economists expect a rebound in both retail sales and monthly inflation.

“For the Fed, the underlying momentum is more important in terms of policy decisions, and that looks to be strong, supported by a tightening labor market, rising incomes and high consumer confidence,” said Gregory Daco, head of US macroeconomics at Oxford Economics in New York.

The Commerce Department said retail sales dropped 0.2 percent last month after a 0.3 percent decrease in February, which was the first and biggest decline in nearly a year. Compared to March last year retail sales increased 5.2 percent.

Economists had forecast retail sales slipping 0.1 percent. Excluding automobiles, gasoline, building materials and food services, retail sales rebounded 0.5 percent last month after falling 0.2 percent in February.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Workers build bed frames at the Hollywood Bed Frame Company factory in Commerce, California, seven miles (11 km) southeast from downtown Los Angeles on April 14. The company held an event to mark an upcoming expansion which will double the size of manufacturer’s facility and workforce, adding 100 new local jobs. Hollywood Bed Frame says it is one of a number of American companies benefiting from a commitment Walmart made last year

to source an additional $250 billion in products made, assembled or grown in the US. (AFP)

economy grew at a 2.1 percent pace in the fourth quarter.

With job growth averaging 178,000 per month in the first quarter, the anticipated slowdown in GDP likely understates the health of the economy. First-quarter GDP tends to be weaker because of calculation problems that the government has acknowledged and is working to resolve.

Retail sales last month were undercut by a 1.2 percent tumble in receipts at auto dealerships. It was the third straight monthly drop in auto sales. Lower gasoline prices also undermined retail through a 1.0 percent drop in receipts at service stations.

A 1.5 percent plunge in sales at building material stores was also a drag. But electronics and appliances store sales recorded their biggest rise since June 2015.

Receipts at clothing stores increased by the most in a year, despite declining mall traffic and

increased competition from online retailers, led by Amazon.com.

Retailers like J.C. Penney Co Inc, Abercrombie & Fitch and Macy’s Inc are scaling back on brick-andmortar operations.

US financial markets were closed for the Good Friday holiday.

In a separate report, the Labor Department said its Consumer Price Index dropped 0.3 percent in March, the first decline in 13 months and biggest decrease since January 2015 amid falling prices for gasoline and mobile phone services, which offset rising rents and food costs.

Increase

The CPI nudged up 0.1 percent in February. In the 12 months through March, the CPI rose 2.4 percent, slowing from February’s 2.7 percent increase.

The so-called core CPI, which strips out food and energy costs, fell 0.1 percent, the first and biggest

drop since January 2010, after rising 0.2 percent in February. The year-on-year increase in the core CPI slowed to 2.0 percent, the smallest advance since November 2015, from 2.2 percent in February.

“We don’t think this is enough to cause the Fed to swerve from their stated desire to continue gradually increasing the funds rate, though it may embolden the doves’ rhetoric,” said Michael Feroli, an economist at JPMorgan in New York

The Fed has a 2 percent inflation target and tracks an inflation measure which is at 1.8 percent. The US central bank lifted its overnight interest rate by a quarter of a percentage point in March and has forecast two more hikes this year.

A 6.2 percent drop in gasoline prices was the biggest factor in the monthly decline in the CPI, which was also weighed down by a record 7.0 percent plunge in the cost of wireless telephone services.