Strong economy spurs retail to best gains since 2017
Retail sales in the U.S. jumped by the most since September 2017 and firsttime filings for unemployment benefits dropped to a fresh 49-year low, as a strong labor market gives American consumers the wherewithal to keep the economy chugging along.
The value of overall sales in March rose 1.6 percent, boosted by gains in motor vehicles and gasoline stations, after an unrevised 0.2 percent decrease the prior month, according to Commerce Department figures released Thursday. That exceeded all forecasts in Bloomberg’s survey calling for a 1 percent gain.
A Labor Department report released at the same time showed initial jobless claims fell last week to 192,000, the lowest since September 1969. Economists had projected an increase. U.S. stocks were little changed at 10:45 a.m. in New York.
“The labor market is alive and well,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. Income gains support consumer spending and “as long as the labor market is doing well there is good reason to expect consumer spending should do fine.”
With first-quarter gross domestic product figures due April 26, the surprisingly strong retail report may spur economists to further increase projections. Analysts raised economic growth forecasts for the period Wednesday after a report showing the trade deficit unexpectedly narrowed in February.
The stronger data signal consumers may continue to drive the expansion amid solid wage gains, low unemployment, and policy makers indicating interest rates will remain on hold this year. The rebound, after a December plunge, may help offset an inventory overhang that’s poised to weigh on growth later this year.
“Retail sales ended 2018 abysmally and began 2019 extraordinarily,” Jefferies economists Ward McCarthy and Thomas Simons wrote in a note. “With a boost from January and March, the consumer sector will be a source of growth again in the first quarter.”
Automobile dealer sales rose 3.1 percent, the most in 18 months, after a drop the prior month. Industry data from Ward’s Automotive Group previously showed unit sales rebounded in March.
Twelve of 13 major retail categories increased. Sales at clothing stores increased 2 percent, the most since May, while food services posted a 0.8 percent gain, the best since July. Nonstore retailers held up with a second-straight 1.2 percent rise, as sporting goods and hobby stores saw the lone decline.
“Stronger-than-expected retail sales in March that spanned multiple discretionary spending categories confirm that the slowdown at the start of the year was temporary,” Bloomberg economists Yelena Shulyatyeva and Carl Riccadonna said. “As transitory factors abated — including a lengthy government shutdown and a shock to household confidence in response to the fourth-quarter market rout — consumer spending recovered in full force.”
Federal Reserve officials, who have signaled they will remain patient on any policy rate changes amid low inflation and gathering uncertainty, will be watching for indications whether consumer spending gains are likely to be sustained over time.
Sales in the “control group” subset, which some analysts view as a cleaner gauge of underlying consumer demand, climbed 1 percent and topped projections. The measure excludes food services, car dealers, building-materials stores and gasoline stations.
A separate report Thursday showed the Bloomberg Consumer Comfort’s monthly gauge of economic expectations climbed to 50 from 47.5, the second increase in the last six months, as more respondents said the economy is getting better. The weekly comfort measure also rose as measures of personal finances and buying climate increased.