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WASHINGTON: US retail sales unexpectedly rose in April as households bought automobiles, building materials and a range of other goods, pointing to underlying strength in the economy.
The Commerce Department said yesterday retail sales edged up 0.1% after a revised 0.5% decline in March.
Economists polled by Reuters had expected retail sales, which account for about 30% of consumer spending, to drop 0.3% last month after a previously reported 0.4% decline in March.
So-called core sales, which strip out automobiles, gasoline and building materials and correspond most closely with the consumer spending component of GDP, increased 0.5% after nudging up 0.1% in March.
The increase in core sales, coming on the heels of relatively strong job growth over the last three months, should help to ally fears of an abrupt slowdown in the economy early in the second quarter (2Q) even as government austerity is starting to put a strain on manufacturing.
“Consumer spending looks to have started 2Q off on a solid note,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
US stock index futures trimmed losses, while the dollar rose against the yen and the euro. Prices for US Treasury debt fell.
Households are spending despite incomes being pinched by the end of a 2% payroll tax cut on Jan 1. In addition, across-the-board government spending cuts kicked in on March 1.
The economy grew at a modest 2.5% annual rate in 1Q. The second quarter growth pace is seen below 2%.
The tone of the retail sales report was mostly firm. Receipts at auto dealerships rose 1% after falling 0.6% in March.
Excluding autos, sales dipped 0.1% after falling 0.4% in March.
Though falling gasoline prices pushed down receipts at gasoline stations, sales excluding gasoline recorded their largest increase since December.
Stripping out gasoline and autos, sales rose 0.6%. However, receipts at grocery stores fell. — Reuters
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