Retail Sales Up 0.4% in April, Boosted by a Strong Labor Market and Falling Prices in Some Areas

November 7, 2023
Stephanie Bedard-Chateauneuf
Americans increased their spending somewhat in April, spending money online and dining out, boosted by a strong job market and a drop in some prices.

Americans increased their spending somewhat in April, spending money online and dining out, boosted by a strong job market and a drop in some prices.

According to a Commerce Department data released Tuesday, car sales increased despite rising prices. However, consumers will face numerous obstacles in the second part of the year, ranging from restricting credit to a deteriorating employment market.

In April, retail sales gained 0.4% compared to March, when sales fell 0.7%. Since January, when spending was boosted by exceptionally mild weather and a big increase in Social Security benefits, there has been no increase in retail sales.

Unlike many other official reports, retail sales figures from the United States are not adjusted for inflation, therefore the headline gain only matched the 0.4% monthly rise in the government's consumer price index for April. This suggests that consumers are struggling to keep up with inflation.

Car and auto component sales increased 0.4%. Despite an increase in gas prices, business at gas stations declined 0.8%, indicating that Americans cut back on vacation and spring break travel.

Retail sales increased 0.6% excluding car dealers and petrol stations.

Spending at online shops climbed by 1.2%, while spending at restaurants and bars increased by 0.6%. However, reductions were seen in department stores, electronic stores, sporting goods and hobby stores, and home furnishings stores.

In the aftermath of the housing bubble and financial crisis, Home Depot predicted its first annual revenue loss since 2009. The country's largest home improvement store has reduced its profit and sales projections for the entire year.

Despite signals of weakening elsewhere in the economy, Americans' spending has remained resilient. A strong labor market has contributed to this.

However, there are signs that they are straining under the weight of increasing prices, and most analysts anticipate the employment market will decline in the second half.

Shoppers are continuing to switch to cheaper brands and are cutting back on non-essential purchases, reversing a widespread trend.

Consumer prices in the United States climbed again in April, and underlying inflation indicators remained high, signaling that the recovery from dramatically higher prices will be lengthy and lumpy. According to the government, prices grew 0.4% from March to April, compared to a 0.1% increase from February to March. Prices increased 4.9% year on year, somewhat less than the 5.1% increase seen in March. It was the weakest annual gain in the previous two years.

Economists are studying how rising expenses have affected consumer spending, which accounts for the vast majority of economic activity in the United States. Additionally, Home Depot's results were a weak start to a busy week of retail earnings, which caused the sector as a whole and the Dow to decline.

Walmart, Target, and Macy's will all report quarterly earnings this week and next, and all of their stock prices fell on Tuesday.

The Commerce Department recently changed its retail-sales numbers based on yearly retail and services industry surveys. The retail data only accounts for roughly a third of total consumer expenditure and excludes services such as hotel stays and aircraft tickets, which have recovered as the danger of COVID-19 has diminished.