American Shoppers Take Breather After Retail Sales Surge

Photographer: David Paul Morris/Bloomberg

A pickup in hiring, rising home values and higher April sales at retailers from Gap Inc. to Cato Corp. signal household spending, which makes up about 70 percent of the economy, is poised to resume growth. Close

A pickup in hiring, rising home values and higher April sales at retailers from Gap... Read More

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Photographer: David Paul Morris/Bloomberg

A pickup in hiring, rising home values and higher April sales at retailers from Gap Inc. to Cato Corp. signal household spending, which makes up about 70 percent of the economy, is poised to resume growth.

Spending at U.S retailers held steady in April after a surge in the previous month that put economic growth on track to pick up in the second quarter.

Purchases increased 0.1 percent to $434.6 billion following a revised 1.5 percent jump in March that marked the biggest gain in four years, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg projected an even larger advance last month.

The better-than-previously-estimated reading at the end of the first quarter as the world’s largest economy recovered from unusually harsh winter weather will help the expansion rebound after growth stalled to start of the year. More employment opportunities and bigger paychecks would further invigorate the household spending that is benefiting retailers from Gap Inc. to Cato Corp. (CATO)

“Things are still set up for a strong second quarter,” said David Berson, chief economist at Nationwide Insurance in Columbus, Ohio, who correctly projected the sales gain. “We’ve seen a reasonably good pickup in job growth. That’s ultimately the key to everything. The economy is getting stronger.”

Small businesses were more upbeat in April than at any time since before the last recession, another report showed. The National Federation of Independent Business’s optimism index climbed to 95.2, the highest since October 2007, from 93.4.

Photographer: Ty Wright/Bloomberg

Eight of 13 major retail categories showed gains last month, led by clothing stores and sporting-goods outlets, today's Commerce Department report showed. Close

Eight of 13 major retail categories showed gains last month, led by clothing stores and... Read More

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Photographer: Ty Wright/Bloomberg

Eight of 13 major retail categories showed gains last month, led by clothing stores and sporting-goods outlets, today's Commerce Department report showed.

Stocks were little changed, with the Standard & Poor’s 500 Index extending a record after briefly topping 1,900 for the first time, following the retail sales figures. The S&P 500 rose less than 0.1 percent to 1,897.45 at the close in New York.

The median forecast of 83 economists surveyed by Bloomberg called for a 0.4 percent advance in retail sales after a previously reported 1.2 percent increase in March. Estimates ranged from a decline of 0.5 percent to a 0.8 percent gain.

Two Months

“You’ve got to view March and April together because either one alone is misleading,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “Spending is growing pretty modestly. It’s going to take significantly stronger job growth for an acceleration.”

While the retail data signal the U.S. economy will pick up this quarter, Chinese industrial output data underscore a slowing economy. Factory production rose 8.7 percent in April from a year earlier, the National Bureau of Statistics said in Beijing, compared with the 8.9 percent median estimate in a Bloomberg survey. Fixed-asset investment climbed in the first four months of the year at the slowest pace since 2001.

Eight of 13 major U.S. retail categories showed gains last month, today’s Commerce Department report showed.

Easter Holiday

A later Easter holiday than last year probably helped boost demand for spring outfits as apparel sales climbed 1.2 percent, the most since October. Receipts also increased at general-merchandise outlets, including a 1.8 percent jump at department stores that was the biggest since January 2013.

Warmer weather and steep discounts also helped to energize shoppers, industry data showed last week. Retailers’ sales at stores open at least a year climbed 6.2 percent in April from a year earlier, the most since June 2011, according to researcher Retail Metrics Inc.

Gap, a San Francisco-based apparel retailer, posted a 9 percent advance in April same-store sales while analysts had projected a drop. The results were led by Old Navy, the company’s value-focused brand, while its Banana Republic and namesake Gap chain also reported gains.

Cato, a Charlotte, North Carolina-based women’s apparel store chain, reported an 18 percent surge in April same-store sales, and raised its profit forecast for the first quarter.

Auto Sales

Today’s report showed sales rose 0.6 percent at automobile dealers after a 3.6 percent increase the prior month.

Industry figures on May 1 showed vehicle sales cooled after a surge in March that reflected unusually cold and snowy weather in early 2014. Cars and light trucks sold at a 16 million annualized pace in April after a 16.3 million rate in March, according to Ward’s Automotive Group. Those were still the best back-to-back months since September-October 2007.

“The economy appears to be on an improving trend for the second quarter and the rest of the year,” Emily Kolinski Morris, senior U.S. economist at Dearborn, Michigan-based Ford Motor Co. (F), said on a sales call on May 1. She cited advances in consumer confidence and employment as helping demand.

Declining demand at restaurants, electronic and furniture stores paced the setback.

Job gains are helping to sustain household purchases. Payrolls rose by 288,000 in April, the biggest increase in two years, while the jobless rate fell to 6.3 percent, the lowest since September 2008, according to a Labor Department report released on May 2.

Consumer Sentiment

The improvement in the labor and housing markets is lifting sentiment. Consumer confidence for the week ended May 4 held near the second-highest level in more than six years as households remained upbeat about their finances, a report on the Bloomberg Consumer Comfort Index (COMFCOMF) showed.

At the same time, the economy still requires a strong dose of stimulus five years after the recession ended because unemployment and inflation are well short of the Fed’s goals, according to Federal Reserve Chair Janet Yellen.

“While conditions in the labor market have improved appreciably, they are still far from satisfactory,” she said in testimony to lawmakers last week.

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

To contact the editor responsible for this story: Carlos Torres at ctorres2@bloomberg.net

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