The US economy struggled to gain momentum early in the second quarter, with retail sales posting their smallest rise in nine months in April and wholesale prices increasing more than expected. Other data on Thursday showed new claims for unemployment benefits fell 44,000 last week to 434,000, but they remained too high to signal a strong labour market recovery.
--- Sales rise 0.5 percent, ex-gasoline up 0.2 percent
--- Wholesale prices increase 0.8 percent
--- Initial jobless claims fall to 434,000
Retail sales increased 0.5 percent after an upwardly revised 0.9 percent gain in March as receipts at gasoline stations and grocery stores rose strongly, the US Commerce Department said. Economists had expected a 0.6 percent rise. Excluding gasoline, retail sales rose a tepid 0.2 percent. It was the tenth straight monthly increase in sales and showed US households exhibiting some resilience to lofty food and gasoline prices, which robbed spending from other areas.
"Consumers have not cut back on how much money they are spending, but they are beginning to cut back on how much stuff they are buying," said Chris Low, chief economist at FTN Financial in New York. Separately, high energy prices lifted prices paid at the farm and factory gate last month. The producer price index rose 0.8 percent after a 0.7 percent increase in March, the Labour Department said. Economists had expected a 0.6 percent rise.
A Reuters survey published on Thursday showed economists trimmed their 2011 annual average estimate for US economic growth to 2.7 percent from 2.9 percent in a poll in April. Stocks on Wall Street were down slightly, while longer-dated Treasury debt prices fell ahead of an auction of 30-year bonds. The dollar was down against a basket of currencies.
The retail data implied consumer spending, which accounts for 70 percent of US economic activity, got off to slow start in the second quarter as household budgets remained stretched by high food and energy prices. A recent drop in gasoline futures pointed to a fall in prices at the pump, which could ease the strain on consumers. US gasoline futures on Wednesday suffered the biggest daily drop since September 2008, with the June contract settling at $3.1228 a gallon, losing 25.69 cents, or 7.6 percent. The futures fell again on Thursday.
In the first three months of 2011, consumer spending grew at a 2.7 percent rate, braking from a 4.0 percent pace in the October-December period, according to the Commerce Department's first estimate of gross domestic product released last month. But upward revisions to March's figures suggested spending might have been stronger than initially thought.
That was supported by another report on Thursday showing strong increases in business sales and inventories in March. Sales rose 2.2 percent, while inventories were up 1.0 percent. That rise in inventories also implied first-quarter GDP growth could be raised from the 1.8 percent annual pace reported by the government last month. "Perhaps the big concern is that spending appears to have lost a lot of momentum at the start of the second quarter," said Paul Dales, a senior US economist at Capital Economics in Toronto.
Economists are hoping the labour market recovery would prove strong enough to boost spending for the remained of the year. Though first-time applications for unemployment benefits fell last week, they remained above the 400,000 level for a fifth straight week. There are fears that the recent jump in claims could see hiring slowing somewhat in May after employers added 244,000 jobs in April, the largest in 11 months.
Comments
Comments are closed for this article.