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Retail sales up on lower gas prices

| Monday, May 13, 2013, 6:36 p.m.

WASHINGTON — Lower-priced gas allowed Americans to step up their spending at retailers in April, from cars and clothes to electronics and appliances. The rebound from a weak March suggests consumers remain resilient in the face of higher taxes and could continue to drive economic growth this spring.

Retail sales edged up 0.1 percent in April, the Commerce Department said on Monday. That's an improvement from a 0.5 percent decline in March, the largest drop in nine months.

The April gain was stronger when taking out the effect of lower gas prices, which reduced sales at gas stations 4.7 percent. The retail sales report is not adjusted for price changes.

When excluding gas station sales, retail spending rose 0.7 percent. And core retail sales, which exclude gas, autos and building supplies, increased 0.5 percent. Economists pay close attention to core sales because they strip out the most volatile categories.

Sales of autos rose 1 percent in April, rebounding from a 0.6 percent drop in March. Sales at clothing stores increased 1.2 percent and sales at general merchandise stores, a category that covers department stores, rose 1 percent. Sales were strong at building materials and garden supply stores, and electronics and appliance stores.

Consumers increased their spending in April, despite paying higher Social Security taxes that has reduced their paychecks this year. Their spending will likely add to economic growth in the April-June quarter. Consumer spending makes up about 70 percent of economic activity.

“This is a good start to the second quarter,” said Jennifer Lee, senior economist at BMO Capital Markets. “The rest of the year is expected to rise further on stronger household finances.”

The economy grew at a 2.5 percent annual rate from January through March, up from a 0.4 percent rate in the October-December quarter of 2012. The gain was largely because of the fastest growth in consumer spending in more than two years.

But most of the increase stemmed from greater spending at the start of the quarter. Consumers cut back sharply on retail spending in March, while paying more for utilities to heat their homes during a colder-than-usual month.

Most economists still expect growth to weaken slightly in the April-June quarter. But after seeing the more upbeat retail sales figures for April, some are raising their forecasts.

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