Inflation and interest rates curbed retail sales in April

NEW YORK — Americans unexpectedly paused their spending in April from March as inflation continued to sting and elevated interest rates made taking on debt more burdensome.

Retail sales were unchanged, coming in well below economists’ expectations, and follow a revised 0.6% pace in March, according to Commerce Department data released Wednesday. Sales rose 0.9% in February. That comes after sales fell 1.1% in January, dragged down in part by inclement weather.

Excluding gas prices and auto sales, retail sales fell 0.1%

Retail sales were also dragged down by a 1.2% drop in online business, reflecting a new sales event at Amazon and the earlier timing of Easter this year, according to Michael Pearce, deputy chief U.S. economist at Capital Economics. Business at electronics stores was up 1.5%. Sales at home furnishings stores slipped 0.5%. Sales at clothing and accessories stores posted a 1.6% gain.

The retail sales figure came out on the same day that the government issued its report on consumer inflation, which showed it cooled slightly last month after three elevated readings, likely offering a tentative sigh of relief for officials at the Federal Reserve as well as President Joe Biden’s reelection team.

“Consumer spending is slowing as elevated interest rates weigh on ratesensitive spending and as the labor market cools,” Pearce wrote in a report published Wednesday. But he said he’s not concerned.

“The resilience of the economy frees the Fed to focus on the incoming inflation data to guide its rate decisions, which we think will improve over the coming months and prompt the Fed to begin gradually easing rates beginning in September,” he continued.

The retail sales data offers only a partial look at consumer spending because it excludes things like travel and lodging. However, at restaurants, the lone service category tracked in the monthly retail sales report, sales rose 0.2% from March.

There have been some hints that the Federal Reserve’s campaign to cool inflation by reining in spending may be taking hold. Employers pulled back on hiring in April, adding 175,000 jobs, still a solid number, but down sharply from the surprisingly strong 315,000 hires in March.

Still, inflation remains an issue.

David Zalubowski/Associated Press Although the Commerce Department reported that retail sales remained unchanged from March to April, sales at clothing and accessories stores were up 1.6%.