Despite rising gas prices, Americans ramped up their spending at the start of spring, signaling modest wage gains and the recent tax overhaul helped buoy spending.
Retail sales—a measure of spending at stores, online-shopping websites and restaurants—rose a seasonally adjusted 0.3% in April from the prior month, the Commerce Department said Tuesday. That growth was largely broad-based, and held up even when excluding gasoline and autos. Food and beverage stores, and clothing and accessories retailers both clocked the largest sales gains since last year. A weak spot was spending at restaurants and bars, declining 0.3% from March.
Analysts had worried that rising gas prices would slow consumer spending in the near term. The national average price for a gallon of regular gasoline in April was $2.76, up nearly 17 cents from the prior month and the highest since mid-2015, according to the U.S. Energy Information Administration. Gasoline-station sales rose 0.8% in April from the prior month.
But when excluding gasoline and autos, spending still rose 0.3% from March, suggesting modest wage gains and larger paychecks from the Trump administration’s late-2017 tax reform helped push consumers to make more purchases.
“It seems that even with the move in energy prices, consumers had the will to spend on nonenergy items,” said Michael Feroli, chief U.S. economist at JPMorgan Chase.
April’s spending increase came on the heels of a stronger-than-expected month of spending growth in March, a relief for analysts who had worried that a late-winter slowdown in consumer spending would continue to drag down economic growth.
The U.S. economy lost some momentum in the first quarter, in part because of the sluggish consumer spending over the winter, but economists expect a pickup for overall growth in the coming quarters. Such spending is the main driver of the economy, accounting for more than two-thirds of the nation’s total measured output.
Forecasters at Macroeconomic Advisers had projected a 2.9% GDP growth rate for the second quarter after the retail sales report was released, above the 2.3% growth rate the economy clocked in the first months of 2017.
Along with other retailers, a number of grocers have reported increases in sales in recent months, though many have had to keep prices low to drive consumers into their stores. Grocery-store sales, not adjusted for inflation, rose 0.5% in April from the prior month and were up 3.3% on the year.
”We are very pleased with the continued sales momentum,” said Kemper Isley, chairman and co-president of Natural Grocers by Vitamin Cottage , Inc., a Colorado-based chain that saw surge in sales during its most recent financial period after using cash from the federal tax bill to slash the cost of goods.
Compared with a year earlier, overall retail sales were up 4.7% in April. Spending continued to outpace inflation, with the Labor Department’s consumer-price index rising 2.5% in April from a year earlier. In the longer term, consumer spending has been buoyed by a falling unemployment rate, which in April was a historically low 3.9%. Measures of consumer confidence have remained high in recent months, supported by continued job gains and broader economic growth.