US re­tail sales, whole­sale prices heat up

The China Post - - FRONT PAGE -

Amer­i­cans in­creased their spend­ing on au­tos, fur­ni­ture, cloth­ing and build­ing ma­te­ri­als in March, which caused over­all re­tail sales to rise for the first time in four months.

Re­tail sales jumped 0.9 per­cent last month, af­ter de­clin­ing 0.5 per­cent decline in Fe­bru­ary, the Com­merce Depart­ment said Tues­day. The re­bound sug­gests that shop­pers are re­turn­ing af­ter an un­sea­son­ably cold win­ter froze sales. Warmer weather fu­eled a 2.7 per­cent in­crease in auto sales and a 2.1 per­cent boost in build­ing ma­te­ri­als, pos­si­ble signs that the lag­ging man­u­fac­tur­ing and con­struc­tion sec­tors might also re­cover from a win­ter slump.

Ex­clud­ing the volatile cat­e­gories of au­tos, gas, build­ing ma­te­ri­als and restau­rants, sales rose 0.3 per­cent.

Econ­o­mists say that sales should con­tinue to climb be­cause of the year-long hir­ing surge and lower gaso­line prices.

The harsh win­ter cur­tailed some of the up­lift from both th­ese fac­tors. Peo­ple cur­tailed their vis­its to malls, auto deal­ers and open houses, which ac­com­pa­nied a slump in the man­u­fac­tur­ing and con­struc­tion sec­tors.

But the March sales fig­ures point to the un­der­ly­ing strength. Cloth­ing pur­chases rose 1.2 per­cent and fur­ni­ture buy­ing in­creased 1.4 per­cent. Restau­rant spend­ing has edged up just 0.7 per­cent in March, but it has jumped 7.7 per­cent over the past 12 months. Spend­ing de­clined at elec­tron­ics stores and gas sta­tions last month, po­ten­tially sig­nal­ing that cheaper prices at the pump are not caus­ing peo­ple to drive more miles.

An­other sea­sonal fac­tor may have been at play. Easter was 15 days ear­lier this year com­pared to 2014, which might have pulled spend­ing for­ward.

Still, re­tail spend­ing re­mains some­what sub­dued. Many Amer­i­cans have qualms about go­ing on a shop­ping spree when the wounds from the hous­ing bust and 2008 fi­nan­cial cri­sis — the most dev­as­tat­ing eco­nomic down­turn in 80 years — are still heal­ing.

In some cases, skep­ti­cal con­sumers are sim­ply await­ing proof that gas prices will stay low. Amer­i­cans since Jan­uary have be­gun to ex­pect in­fla­tion to rise, sug­gest­ing that doubts re­main about whether they will ac­tu­ally en­joy the pro­jected sav­ings, Deutsche Bank econ­o­mist Joseph La­Vorgna wrote re­cently.

Econ­o­mists also say that the benefits from cheaper gas ac­crue slowly over time. As a re­sult, changes in be­hav­ior are of­ten seen only af­ter three to six months.

More Ex­pen­sive Gas Lifts

Whole­sale Prices

Higher gas costs drove up whole­sale prices last month, end­ing a string of four straight de­clines.

The pro­ducer price in­dex in­creased 0.2 per­cent in March, af­ter sharp drops in the two pre­vi­ous months, the La­bor Depart­ment said Tues­day. The in­dex mea­sures prices be­fore they reach the con­sumer.

Ex­clud­ing the volatile food and en­ergy cat­e­gories, core prices also rose 0.2 per­cent.

In the past year, whole­sale prices have plum­meted 0.8 per­cent, the sharpest drop in the four years since the gov­ern­ment up­dated its meth­ods for cal­cu­lat­ing the in­dex. Cheaper gas caused most of the decline. Core prices have risen 0.8 per­cent in the past 12 months.

Last month’s in­crease sug­gests in­fla­tion has sta­bi­lized and may move slightly higher in the months ahead. The gov­ern­ment re­ports con­sumer prices Fri­day.

Fed of­fi­cials have said they want to be “rea­son­ably con­fi­dent” that in­fla­tion will move closer to its 2 per­cent goal be­fore they raise rates. Many econ­o­mists pre­dict the Fed won’t move un­til Septem­ber.

Gas prices fell about 60 per­cent from last June through Jan­uary, when they reached a six-year low of US$2.03. But they moved up since then. Gas prices av­er­aged US$2.39 a gal­lon na­tion­wide Mon­day, ac­cord­ing to AAA. That’s five U.S. cents cheaper than a month ear­lier.

The Fed aims for 2 per­cent in­fla­tion to guard against de­fla­tion, which can cause a desta­bi­liz­ing drop in prices and wages.

Yet the Fed’s pre­ferred mea­sure of in­fla­tion has been stuck be­low 2 per­cent for nearly three years. An­other fac­tor hold­ing down prices has been the strong U.S. dollar, which makes im­ported goods cheaper.

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