US retail sales may have eased as consumers tighten spending

Washington: Sales at US retailers probably slowed in April as the weather turned more seasonable and consumers took a breather following a pre-Easter holiday buying spree, economists said before a report this week.

The projected 0.2 per cent gain in purchases would follow a 0.8 per cent advance in March, according to the median forecast of 68 economists surveyed by Bloomberg News ahead of Commerce Department figures on May 15. Other data may show increases in the cost of living eased, home construction stabilised and manufacturing picked up.

Demand at building material, clothing and even furniture stores probably suffered last month compared with a weather-induced gain in the first three months of 2012, the warmest on record. Smaller employment gains may also make it more difficult for consumer spending to match last quarter's advance, the biggest in more than a year.

"Households are still spending at a fairly healthy clip — not at a spectacular rate," Paul Dales, a senior US economist at Capital Economics Ltd. in London, said. "Things aren't too bad at the moment."

Trailing estimates

Retailers' same-store sales trailed analysts' estimates in April for the first time since November, according to industry data. Sales at Target Corp., the second-biggest US discount chain, rose 1.1 per cent, falling short of a 2.9 per cent projection.

Part of that slowdown may reflect seasonal events that pulled sales into the previous month. The average temperature in March was the warmest on record, and Easter fell on April 8 compared with April 24 in 2011.

The retail sales category used to calculate gross domestic product (GDP), which excludes auto dealers, building material stores and service stations, will show a 0.4 per cent gain in April, the same as the prior month, according to economists surveyed.

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

Weaker job creation threatens consumers' ability to sustain spending at such levels. Employers took on 115,000 workers last month, the fewest since October, according to a May 4 Labour Department report.

Less expensive gasoline will free up some cash for other goods and services. The average price of a gallon of regular gas fell to $3.73 (Dh13.7) on May 10 from a peak this year of $3.94 in early April, according to AAA, the nation's largest auto club.

The decline in fuel costs is also showing up in measures of inflation. The consumer-price index was little changed in April after climbing 0.3 per cent the prior month, according to the survey median before a Labour Department report on May 15.

Receding inflation is one reason Federal Reserve policy makers have indicated they see no need to raise borrowing costs. On May 16, the Federal Open Market Committee will issue minutes from its April 24-25 meeting, during which officials repeated their view that interest rates are likely to remain "exceptionally low" at least through late 2014.

Improvements in the housing market, which has been a drag on the expansion, would give central bankers reason to revise those plans. A May 16 report from the Commerce Department will probably show builders began work on homes at a 685,000 annual rate in April, up from 654,000 the prior month, according to the Bloomberg median forecast.

Industrial output

Manufacturing remains at the forefront of the expansion. Production at the nation's factories, mines and utilities probably rose 0.6 per cent in April after being little changed in the previous two months, economists projected a Fed report May 16 will show.