Key Takeaways:
U.S. consumer spending showed continued durability in April but at a slower pace than expected, a sign of resilience that could complicate the Federal Reserve’s efforts to control inflation.
“Retail sales continued to grow in April despite higher gas prices driven by the ongoing conflict in Iran, cautious consumer sentiment and the persistent concerns about sustained inflation,” NRF President and CEO Matthew Shay said in a statement. “While consumers are mindful on costs, retailers are working hard to keep everyday goods affordable for American families.”
Retail sales rose 0.34% from the prior month, according to data from the CNBC/NRF Retail Monitor, marking the seventh consecutive month of gains but falling short of the 0.6% increase projected by economists surveyed by FactSet. The result follows a 0.4% gain in March. On a year-over-year basis, sales were up 5.73%. The spending was supported by a steady labor market, wage growth, and a wave of tax refunds, though analysts note the effects of the latter may soon fade.
The April data revealed a clear divergence in consumer priorities. Clothing and accessories stores were a standout, with sales jumping 9.75% from the previous year. Sporting goods, health and personal care, and online retailers also posted robust year-over-year gains of 8.55%, 8.42%, and 8.09%, respectively. In contrast, spending on big-ticket items faltered, with furniture and home furnishings stores seeing a 0.06% decline month-over-month, the only category to post a decrease.
The trend suggests a split in household financial health. “Higher income [earners] have seen strong asset growth in the stock market and above-average income growth, putting them in a stronger position than lower-income households,” said Mark Mathews, NRF Chief Economist. This dynamic was visible in Bank of America’s card data, which also showed higher-income households driving the bulk of spending momentum.
The steady, if unspectacular, consumer spending comes just as other data shows inflation re-accelerating. Wholesale inflation jumped 6% annually in April, its largest increase since 2022, putting pressure on the Federal Reserve. While consumer spending is the engine of the U.S. economy, its continued strength may prevent inflation from cooling to the central bank’s 2% target.
Economists expect the consumer resilience will be tested in the coming months. “The real test will come in May, by which point the flow of tax refunds will have tapered off significantly, while high gas prices probably will remain elevated,” wrote Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. The April report, while showing the consumer is not breaking, suggests a more challenging path ahead as inflation and higher borrowing costs continue to bite.
This article is for informational purposes only and does not constitute investment advice.
