U.S. retail sales rise in April on cars, clothing, electronics

WASHINGTON -- Lower-priced gasoline 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 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. 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 also were strong at building materials and garden supply stores and electronics and appliance stores.

In this April 15, 2013 picture, a woman walks past a J. Crew retail store in Baltimore. Americans increased their spending in April at retail businesses, buying more cars and clothes after cutting purchases sharply in March. The rebound suggests consumers may help boost growth again in the April-June quarter(AP Photo/Patrick Semansky)

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

Most of the increase came 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.

Some economists had worried that the weak month of spending in March was a sign the tax increase was starting to catch up with consumers.

Other factors appear to have made consumers more resilient.

Chris G. Christopher Jr., director of consumer economics at IHS Global Economics, said falling gas prices and an improving job market have cushioned some of the impact of the higher Social Security taxes.

The economy added 165,000 jobs in April and has created an average of 208,000 jobs a month since November. That's well above the monthly average of 138,000 for the previous six months.

Cheaper gas is leaving consumers with more disposable income. The national average price has risen slightly during the last week to $3.58 a gallon. But it is still 21 cents lower than the peak price reached Feb. 27.

A surging stock market and increases in home prices may be making consumers feel wealthier and more inclined to spend.

Most economists still expect growth to weaken slightly in the April-June quarter. After seeing the more upbeat retail sales figures for April, some are raising their forecasts. Analysts at JPMorgan now predict growth will slow to a 2 percent rate, up from their previous forecast of 1.5 percent.

Many expect economic growth will strengthen in the second half of the year.