Retail spending increased 0.9% in April, boosted by demand and inflation

Consumers kept spending in April, with retail sales rising about in line with Wall Street expectations despite an ongoing surge in prices.

Monthly sales rose 0.9% overall, just below the Dow Jones estimate for a 1% increase, the Commerce Department reported Tuesday. Excluding autos, sales increased 0.6%, which was better than the 0.4% estimate.

The numbers are not adjusted for inflation, so they are indicative both of sustained spending as well as the fastest acceleration in prices the U.S. economy has seen in about 40 years.

“Retail sales in April show that the consumer is weathering the inflationary headwinds, rising for the fourth consecutive month,” said Jeffrey Roach, chief economist at LPL Financial. “Core categories show signs that consumers are likely dipping into savings to offset the decline in real wages. If pricing pressures can moderate enough to relieve some of the pressure on consumers, we expect a rebound in economic growth in Q2.”

In addition to the solid showing in April, March’s spending was revised substantially higher, from the original estimate of a 0.5% increase to a 1.4% gain. Ex-autos sales were revised sharply higher as well, to a gain of 2.1% in March against an original 1.1%.

On a year-over-year basis, sales were up 8.2% on the headline number, and 10.9% excluding autos.

April’s gains were powered by a 4% gain from miscellaneous retail and a 2.1% jump in online sales. Bars and restaurants also showed a solid 2% increase. All three categories posted larger gains than in March.

The increases came despite a 2.7% decrease at gasoline stations as energy prices declined during the month. Excluding gas stations, sales increased 1.3%. Even with the monthly decline, gasoline sales soared 36.9% from a year ago.

Bar and restaurant sales rose 19.8% from a year ago, when the economy was still struggling with Covid-related restrictions.

The sales data are largely consistent with an economy that continues to grow despite inflation pressures. Prices overall increased 0.3% in April and 0.6% excluding food and energy. On an annualized basis, the consumer price index rose 8.3% on headline and 6.2% on core in April.

Gross domestic product fell 1.4% on an annualized basis in the first quarter, but most economists expect growth to pick up through the year.

A separate report Tuesday showed that industrial production rose 1.1% in April, well above the 0.5% Dow Jones estimate, according to Fed data. Capacity utilization, or the level of potential output being realized, increased to 79%, slightly ahead of the 78.6% estimate.