Retail Sales Growth in U.S. Slows as Gas Costs Depress Consumer Confidence

Retail sales rose in April at the slowest pace in nine months and consumer sentiment declined last week, highlighting the risks that rising gasoline prices pose for the U.S. economy.

Purchases increased 0.5 percent, the smallest gain since July, after a 0.9 percent March advance that was more than double the previous estimate, Commerce Department figures showed today in Washington. The Bloomberg Consumer Comfort Index dropped to minus 46.9 in the period to May 8, the lowest reading since March.

Spending improved at service stations and grocery stores and dropped at furniture and electronics dealers, showing mounting bills for food and gasoline are leaving Americans with less money for other goods. At the same time, sales at chains like Macy’s Inc. (M) topped analysts’ estimates, a sign the improving job market will prevent consumer spending from faltering.

“Higher gas prices are starting to cut into discretionary spending but a wholesale retrenchment by consumers is not likely,” said David Resler, chief economist at Nomura Securities International Inc. in New York. “More jobs are being created. The outlook for the economy is one of moderate growth.”

Stocks rose as commodities rebounded from an earlier slump. The Standard & Poor’s 500 Index climbed 0.5 percent to 1,348.65 at the 4 p.m. close in New York. The S&P Supercomposite Retailing Index advanced 1.1 percent.

Survey Results

The median forecast of 78 economists surveyed by Bloomberg News called for a 0.6 percent rise in retail sales after a 0.4 percent gain previously reported for March. Estimates ranged from gains of 0.2 percent to 1.2 percent.

Other reports showed the number of workers filing claims for unemployment insurance payments dropped less than forecast last week and wholesale prices climbed more than projected in April.

Applications for jobless benefits decreased 44,000 in the week ended May 7 to 434,000, Labor Department figures showed. Economists forecast 430,000 claims, according to the median estimate in a Bloomberg survey.

The producer-price index rose 0.8 percent, compared with a 0.6 percent median estimate of economists surveyed, other figures from the Labor Department showed. The so-called core measure, which excludes volatile food and energy costs, increased 0.3 percent, more than projected.

Sales Breakdown

Eight of the 13 major retailer categories showed gains last month, the Commerce Department report showed, led by a 2.7 percent jump at service stations and a 1.2 percent advance at food and beverage stores. Purchases at furniture stores fell 1.1 percent, and were down 2.2 percent at electronics dealers.

The jump at service stations probably reflected higher gasoline prices because the figures aren’t adjusted for inflation. Regular fuel averaged $3.81 a gallon in April, up from $3.54 in March. The price reached $3.99 on May 4, the highest since July 2008, according to AAA, the nation’s biggest automobile organization.

A 14 percent plunge in crude oil prices on the New York Mercantile Exchange from April 29 through yesterday signals the worst news at the gasoline pump may be over, allowing spending on other goods and services to recover in coming months.

‘Encouraging Signs’

“We’re seeing encouraging signs that gas futures are coming down, and if that continues, it will lessen the hit to consumers,” said Nomura’s Resler.

April sales at Macy’s, the second-largest U.S. department store chain, climbed 10.8 percent from the same month last year, exceeding projections. The Cincinnati-based company yesterday raised its annual profit forecast after first-quarter earnings grew more than five-fold from a year ago.

“We are off to another strong start this year and we have every expectation it will continue,” Karen Hoguet, chief financial officer of Macy’s, said on a conference call with investors yesterday.

Payrolls grew by 244,000 last month, the seventh straight gain, after increasing a revised 221,000 the prior month, Labor Department figures showed. Nonetheless, the jobless rate climbed to 9 percent, the first increase since November, according to a separate survey of households.

The drop in the Bloomberg comfort gauge reflected a decrease in one of its three components: the measure of personal finances fell to minus 10.6 last week, the lowest since the first week of February, showing the damage rising fuel prices can cause.

Comfort Components

A gauge of Americans’ views of the economy, at minus 75, was little changed from minus 75.8 the previous week. The buying-climate index was at minus 54.9, compared with the previous week’s minus 56.

In the West, where fuel prices exceed the national average, the comfort index fell to levels previously reached in mid 2009 that were the lowest in records dating back to 1990. Sentiment among younger adults and home renters plunged to the lowest this year, today’s report also showed.

“Consumers will likely need to observe a steady descent in the cost of fuel before sentiment will see a sustainable increase,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. Higher energy bills are a “reminder for beleaguered consumers day to day of what has been a difficult economic recovery.”

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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