US retail sales rise broadly; consumer prices rebound

WASHINGTON: US retail sales increased broadly in April while consumer prices rebounded, pointing to a pickup in economic growth and a gradual rise in inflation that could keep the Federal Reserve on track to raise interest rates next month.

The reports on Friday added to labor market data in suggesting the near stall in economic activity in the first quarter was an anomaly. But a moderation in year-on-year inflation led financial markets to dial down expectations for at least two more rate increases this year.

“The economy picked it up a notch from the slow start earlier this year, but the inflation fires are not burning brightly and this will likely keep the Fed on just a gradual pace for interest rate hikes later this year,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

The Commerce Department said retail sales rose 0.4 percent last month after an upwardly revised 0.1 percent gain in March. Sales rose 4.5 percent in April on a year-on-year basis.

Economists had forecast overall retail sales increasing 0.6 percent last month. Excluding automobiles, gasoline, building materials and food services, retail sales gained 0.2 percent after advancing 0.7 percent in March.

These so-called core retail sales correspond most closely with the consumer-spending component of the gross domestic product (GDP).

Consumer spending, which accounts for more than twothirds of US economic activity, increased at a 0.3 percent annualized rate in the first quarter, the weakest pace since the fourth quarter of 2009. That contributed to holding down first-quarter GDP growth to a 0.7 percent rate.

In a separate report on Friday, the Labor Department said its Consumer Price Index (CPI) rose 0.2 percent after dropping 0.3 percent in March. The rise in prices suggested that March’s drop, which was the first in 13 months, was an aberration.

In the 12 months through April, the CPI increased 2.2 percent. While that was a slowdown from March’s 2.4 percent increase, it still exceeded the 1.7 percent average annual increase over the past 10 years.