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Retail sales April 2023:


A shopper looks at shirts at a clothing store in Atlanta, Georgia, U.S., Tuesday, Feb. 14, 2023.

Dustin Chambers | Bloomberg | Getty Images

Consumers barely kept up with inflation in April as retail sales rose but fell short of expectations, the Commerce Department reported Tuesday.

The advanced sales report showed a 0.4% gain, below the Dow Jones estimate of 0.8%. Excluding auto-related figures, sales rose 0.4%, which was in line with expectations.

Since the figures are not adjusted for inflation, the total increase was equal to the 0.4% monthly increase in the consumer price index. On a year-over-year basis, sales rose just 1.6%, well below the CPI pace of 5%.

A 0.8% drop in petrol sales held consumption figures back. Sporting goods, music and bookstores showed a decrease of 3.3%, while furniture and home furnishings saw a decrease of 0.7%.

Miscellaneous store retailers led the gainers with a 2.4% increase, while online sales rose 1.2% and health and personal care retailers saw a 0.9% increase. Food and beverage sales were up 0.6% and up 9.4% on a 12-month basis.

“Retail sales posted a modest rebound in April, but the gains mostly reflected higher prices and a sustained turnaround is unlikely with consumer fundamentals becoming less supportive,” said Lydia Boussour, senior economist at EY-Parthenon.

Although the report indicated a struggling consumer, it was the first positive reading since January and followed a 0.7% decline in March. The control group, which excludes autos, gas stations, building materials and supply stores, and food service and beverage outlets, also rose 0.7%, above expectations for 0.4%.

Overall, the report was “even stronger than our previous assumptions and indicates upside” to the spending outlook, Goldman Sachs economist Ronnie Walker said in a note.

Treasury yields rose after the report as initial reaction focused more on the upbeat figure from earlier autos, although stocks were lower in morning trade.

Consumers still face a tough road ahead.

Indications point to higher interest rates ahead. Indeed, Atlanta Federal Reserve President Raphael Bostic told CNBC on Monday that he believes a rate hike would be more likely than depressed markets have priced in before the end of the year.

Consumers have taken on more debt to deal with persistently high inflation. Total debt rose to more than $17 trillion in the first quarter as higher interest rates pushed up borrowing costs for things like mortgages and credit cards, according to a report from the New York Federal Reserve on Monday.

“As the labor market continues to cool and the pull of the Fed’s aggressive monetary tightening takes hold, we suspect a further slowdown is ahead,” wrote Andrew Hunter, deputy chief US economist at Capital Economics.

In a speech Tuesday morning, Cleveland Fed President Loretta Mester noted the “long-term costs” of inflation and stressed that the central bank is committed to bringing inflation back to the 2% target.

Other economic news Tuesday saw a 0.5% increase in industrial production for April, better than the 0.1% estimate according to the Federal Reserve. Capacity utilization was 79.7%, just below the estimate.

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