Consumer spending lifts April’s retail sales by 0.9%

Figure suggests private purchases sustaining economy, forestalling recession

WASHINGTON — U.S. retail sales rose 0.9% in April, a solid increase that underscores Americans’ ability to keep ramping up spending even as inflation persists at nearly a 40-year high.

The increase was driven by greater sales of cars and electronics, and at restaurants, the Commerce Department said Tuesday.

Even adjusting for inflation, which was 0.3% on a monthly basis in April, sales increased. Gas prices fell slightly last month, restraining inflation, after soaring in March in the aftermath of Russia’s invasion of Ukraine.

Consumers are providing critical support to the economy even after a year of seeing prices spiral higher for gas, food, rent, and other necessities. The economy contracted in the first three months of the year, but consumer and business spending still increased at a healthy pace.

“Never bet against the U.S. consumer has always been a good adage,” said Paul

Ashworth, chief U.S. economist at Capital Economics, a consulting firm, in a note to clients. “Despite the surge in prices weighing on their purchasing power, the U.S. consumer now appears to be single-handedly keeping the global economy afloat.”

The Tuesday report also showed that sales in March were revised much higher, to a gain of 1.4%, from 0.7%. As a result, spending even rose that month after adjusting for inflation, which surged to 1.2% as gas prices rose. The revision suggests the economy likely shrank by less than the 1.4% contraction that was reported last month.

The strength of the consumer makes a recession much less likely, at least anytime soon, Ashworth said. But it also keeps the pressure on the Federal Reserve to tighten borrowing costs to cool the economy.

Strong hiring, rapid wage increases and a healthy level of savings — on average — have bolstered consumers’ financial health, despite a sharp increase in consumer prices of 8.3% in April compared with a year ago. The increase was just below a four-decade high reached in March.

Still, economists are watching closely to see if consumer spending can continue to outpace inflation. Slower spending would drag down the economy’s growth. While that might bring down inflation, it would also threaten to push the economy into recession.

Still, the robust sales figures in the government’s report are also impressive since retail sales covers only about one-third of consumer spending, with the rest going to services such as travel, haircuts and health care.

The retail sales figures suggest that some supply chain snarls may be easing. Sales at auto dealers rose 2.2%, and they increased 1% at electronics stores and 0.7% at furniture stores. Purchases at online retailers jumped 2.1% and they climbed 2% at restaurants and bars.

Several factors are enabling consumers to keep spending even as prices soar. Wages and salaries have been rising rapidly as businesses, struggling to fill a record-high number of open jobs, have been forced to offer more generous paychecks.