Sat, 15 May 2021

Retail sales in United States rose 6.9 percent last month

Robert Besser
18 Apr 2021, 20:43 GMT+10

NEW YORK, New York: Buoyed by the pandemic relief package and increased U.S. COVID-19 vaccinations, retail sales rebounded 9.8 percent last month, the largest increase since May 2020, while first-time claims for unemployment benefits also tumbled last week to the lowest level since March 2020.

Manufacturing was boosted by strong domestic demand, although output at factories rebounded modestly last month amid a global semi-conductor chip shortage. The data follows recent reports indicating inflation heating up, but is not likely to change the Federal Reserve's ultra-easy monetary policy stance.

"Demand is booming right now. Fed officials up to now have said they expect this boost in demand to be fleeting, and will not consider changes in policy until the labor market is at full employment and price levels increase at a sustained pace," said Chris Low, chief economist at FHN Financial in New York, as quoted by Reuters. "Their resolve will be tested in the next couple of months."

Data for February was revised higher to show retail sales dropping 2.7 percent, instead of 3.0 percent as previously reported. March's rise pushed the level of sales 17.1 percent above its pre-pandemic level and to a record high. On a year-on-year basis, retail sales surged a record 27.7 percent.

The rebound was led by motor vehicles, with receipts at auto dealerships accelerating 15.1 percent, while sales at clothing stores soared 18.3 percent.

Restaurants and bars also saw a 13.4 percent jump in receipts, although sales were 1.8 percent lower compared to March 2020.

Electronics and appliance stores and furniture stores saw sales increase 10.5 percent and 5.9 percent, respectively, while those at sporting goods, hobby, musical instrument and book stores also improved. Sales at building material stores vaulted 12.1 percent and online retail sales increased 6.0 percent.

The data, together with upbeat earnings reports from several companies, propelled the S&P 500 index and the Dow Jones Industrial Average to record highs. The dollar was steady against a basket of currencies, while U.S. Treasury prices were higher.

Retail sales, excluding automobiles, gasoline, building materials and food services, rose 6.9 percent last month after a revised 3.4 percent decrease in February. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product and were previously estimated to have declined 3.5 percent in February.

The economy grew at a 4.3 percent pace in the fourth quarter, described by the Fed's "Beige Book" report on Wednesday as having "accelerated to a moderate pace from late February to early April."

Growth is expected to top 7.0 percent this year, which would be the fastest since 1984, following a 3.5 percent contraction last year, which was the worst performance in 74 years.

A second report from the Fed on Thursday showed output at factories increased 2.7 percent in March after dropping 3.7 percent in February.

Manufacturers in New York state and the mid-Atlantic region, which saw strong manufacturing activity this month, are upbeat about prospects over the next six months, especially new orders.

"We think that activity in the manufacturing sector will keep picking up over time," said Daniel Silver, an economist at JPMorgan in New York, as reported by Reuters.

In a fifth report on Thursday, the Labor Department said initial claims for state unemployment benefits decreased 193,000 to a seasonally adjusted 576,000 for the week ended April 10, the lowest level since mid-March 2020, but still well above their pre-pandemic level.

The augmentation of unemployment benefit programs, including the weekly subsidy, could also be encouraging some people to file for aid and others not to seek work.

"Although one cannot read too much into any one week's reading on jobless claims, the degree of the drop in initial filings hints at a strong labor market in early April, as Covid-related restrictions in various states were eased," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

The economy created 916,000 jobs in March, the most in seven months, while employment remains 8.4 million jobs below its peak in February 2020.

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