U.S. Retail Sales Cool After Warm-Weather Spree: Economy

May 15 (Bloomberg) – Consumer prices were unchanged in April, matching the median forecast of economists surveyed by Bloomberg News. The core rate rose 0.2 percent for a second month, Labor Department data showed. April retail sales in the U.S. rose 0.1 percent Commerce Department figures showed today in Washington. Bloomberg's Deirdre Bolton, Dominic Chu and Michael McKee report. (Source: Bloomberg)

Retail sales rose in April at the slowest pace of the year as Americans took a break from a shopping spree induced by unseasonably warm weather in prior months and an earlier Easter holiday.

The 0.1 percent gain followed a 0.7 percent increase in March, Commerce Department figures showed today in Washington. The April advance matched the median forecast in a Bloomberg News survey.

Sales of clothing declined, while purchases excluding cars, building materials and service stations -- the category used to calculate gross domestic product -- rose more than forecast. Other reports today showed manufacturing in the New York region accelerated more than projected, and confidence among U.S. homebuilders jumped to a five-year high.

“Consumers overall are still pretty much engaged,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, the most-accurate forecaster of retail sales in the two years through April, according to data compiled by Bloomberg News. “Manufacturing is still a solid contributor to growth. It is growing with the pace of demand.”

Stocks swung between gains and losses after the Standard & Poor’s 500 Index dropped to the lowest level in three months, as Greece’s struggle to form a government tempered better-than-estimated economic data. The S&P 500 rose less than 0.1 percent to 1,338.56 at 2:12 p.m. in New York.

Elsewhere in Europe, Germany helped the euro area avoid its second recession in three years as growth in the region’s largest economy offset contractions in peripheral countries.

German GDP

The economy in the 17-nation euro region stagnated in the latest quarter compared with the prior three months, the European Union’s statistics office in Luxembourg said. The German economy expanded 0.5 percent.

Nine of 13 major categories showed gains in retail sales last month, led by auto dealers, furniture stores and non-store retailers that include online merchants. Purchases at restaurants rose 0.4 percent in April after a 0.9 percent gain the month before.

“From the industry perspective, we’ve seen a pretty decent trend in sales over the last year,” G. Price Cooper, chief financial officer of restaurant chain Texas Roadhouse Inc. (TXRH), said during a May 9 investor conference.

Warmer Weather

Part of the slowdown in retail sales for April may reflect seasonal events that pulled purchases into the previous month. The average temperature in March was the warmest on record in the U.S., and Easter fell on April 8 compared with April 24 the year before.

Consumer spending, which accounts for 70 percent of the economy, grew at a 2.9 percent annual rate last quarter, the most since the final three months of 2010, according to data from the Commerce Department.

Sustaining such a pace of purchasing may be more difficult with weaker job growth. Employers took on 115,000 workers last month, the fewest since October, a Labor Department report showed May 4. The jobless rate also declined as people left the work force.

Still, an American Express Co. survey of 541 global finance executives showed 56 percent are planning to boost payrolls in the U.S. over the next 12 months. Seventy-five percent of the American executives forecast “robust” economic growth after this year.

“Finance executives are looking for ways to stimulate growth, in part by deploying some of the cash that has built up on corporate balance sheets in recent years,” Janey Whiteside, a senior vice president at American Express, said in a statement.

Effect on GDP

The retail sales category used to calculate GDP increased 0.4 percent after a 0.5 percent increase in the previous month. The category was forecast to rise 0.3 percent, the Bloomberg survey showed.

Macy’s Inc., the owner of its namesake and Bloomingdale’s department stores, this week reported first-quarter profit that topped analysts’ estimates as sales at stores open at least a year advanced 4.4 percent. The Cincinnati-based retailer also boosted its same-store sales forecast to about 3.7 percent this year from a previous estimate of 3.5 percent.

Same-store sales were “clearly above what we had expected, and that makes us feel very good about the consumer,” Chief Financial Officer Karen Hoguet said during a May 9 earnings call.

Vehicle Sales

Sales climbed 0.5 percent at automobile dealers, after a 0.2 percent increase the prior month, today’s Commerce Department report showed. Cars and light trucks sold at a 14.4 million annual rate in April, up less than 100,000 from the prior month, according to data from Ward’s Automotive Group.

Manufacturers are getting a boost as auto sales running at the fastest pace in four years lift demand for goods from glass and machinery to sound systems.

The Federal Reserve Bank of New York’s general economic index increased to 17.1 this month from 6.6 in April. The median estimate in a survey of Bloomberg economists called for an increase to 9. Readings greater than zero signal expansion in the index, which covers New York, northern New Jersey and southern Connecticut.

Manufacturing makes up 12 percent of the U.S. economy and about 6 percent of New York’s. Harman International Industries Inc., a maker of car-audio systems based in Stamford, Connecticut, got a record $2 billion contract in April from a luxury European automaker whose name it didn’t disclose.

Builder Confidence

Homebuilders are also gaining confidence as cheaper property prices and mortgage rates at a record low combine to boost demand.

The National Association of Home Builders/Wells Fargo index of builder confidence rose to 29, the highest since May 2007, a report from the Washington-based group showed today. The gauge exceeded the highest projection in a Bloomberg survey in which the median estimate was 26. Readings below 50 mean more respondents said conditions were poor.

Americans may also get a break as energy prices subside. A Labor Department report today showed that the consumer price index was unchanged in April.

The index matched the median forecast of economists surveyed by Bloomberg and followed three straight gains that included a 0.3 percent rise in March. The so-called core measure, which excludes more volatile food and energy costs, rose 0.2 percent for a second month.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net; Timothy R. Homan in Washington at thoman1@bloomberg.net

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

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