US retail sales flat, inflation fears on the rise
L MAY 16
WASHINGTON: The United States economic recovery showed signs of hitting some turbulence as shoppers curbed their spending last month and manufacturing slowed due to supply bottlenecks.
After a rush of shopping in March, US retail sales were flat in April, and while auto sales rose, vehicle production fell amid a global semiconductor supply crunch, according to government data released on Friday.
Meanwhile, a private survey showed consumer confidence fell due to concerns about rising prices as the reopening of the world’s largest economy drives speculation of a sustained rise in inflation.
Officials in President Joe Biden’s administration have tried to downplay the fears of a slowing recovery, but acknowledged there could be some bumpy months ahead.
“This was an unprecedented economic downturn... where we completely powered down the economy,” said Cecilia Rouse, chair of Biden’s Council of Economic Advisers.
“Given the extraordinary and unprecedented circumstances of the pandemic, it will remain difficult for analysts to accurately forecast economic data until we have more fully recovered,” she told reporters.
The University of Michigan consumer sentiment index fell more than six points to 82.8 in May, amid increasing concerns about inflation.
But the survey showed “consumer spending will still advance despite higher prices due to pent-up demand and record saving balances.”
Fears the world’s largest economy will see an inflationary spike have been gaining traction, fueled by recent data showing prices surging as the economy reopens following the Covid-19 shutdowns, including a 4.2-per cent year-on-year jump in the consumer price index for April reported earlier this week.
Economists say the spikes reflect a rebound from the price collapses one year ago as the pandemic began, and also are pushed by supply bottlenecks as industries struggle to return to normal.
But the Federal Reserve’s repeated assurances that the issues are transitory have not eased the concerns.
Rouse said some price gains are due to unusual and temporary factors, like rental companies buying up cars to replenish their fleets.
“There’s going to be some choppiness” as the economy recovers, she said, but the issues should not lead to inflation beyond the Fed’s control.
The volume of retail sales last month held steady at just under $620 billion, as declines in clothing, sporting goods, furniture, gasoline and even the roaring ecommerce market were offset by gains in cars, electronics, food and healthcare, the commerce Department said.
The cooling off came after a 10.7-per cent jump in March compared to February, but total retail sales in April were more than 51 per cent higher than the same month last year, when the Covid-19 pandemic first forced the near-shutdown of the world’s largest economy.
Ian Shepherdson of Pantheon Macroeconomics called the April pause “a modest post-stimulus hangover after the March binge.”
The National Retail Federation (NRF) stressed that while consumers tapped the brakes last month, sales remain strong and household finances are healthy.
“Consumers are demonstrating that when they feel safe, they are both willing and able to spend and are driving the economy forward,” NRF President Matthew Shay said in a statement.
He predicted “the economic recovery will likely continue to gain steam as we head into the summer months.”