US retail sales, wholesale prices heat up
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
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.