Data on Monday showed that US retail sales rose again last month. This suggests that domestic consumers are extending their spending spree into the spring, adding pressure on bets on a near-term interest rate cut from the Federal Reserve. The Commerce Department said core retail sales rose 0.7% from February to a total of $709.6 billion, exceeding economists’ consensus forecast of 0.4%. The February total was also revised higher, to a gain of 0.9% from the original estimate of 0.6%. The closely tracked watchdog group’s figure rose 1.1% during the month, more than triple Wall Street expectations. This figure, which does not include automobiles, building materials, office supplies, gas station sales, and tobacco, feeds into the government’s gross domestic product calculations.
The statement indicated that gasoline station sales decreased by 3%, after Energy Ministry data showed that the national average rose by 6.4% from February to $3,542 per gallon. U.S. gas prices rose 6.4% between February and March, with the average cost per gallon at $3,542 per gallon, according to Department of Energy data.
US stocks were little changed after the data release, with futures pegged for the S&P 500 pointing to an opening bell gain of 33 points, while the Dow Jones rose 305 points. Meanwhile, the Nasdaq is looking at a 160-point rally. More Economic Analysis: Beware of interest rates as high as 8% on mortgages Hot inflation report hits stocks; Here’s what happens next: The inflation report will disappoint markets and the Fed.
Rising bond yields and inflation pose a challenge for the Fed
Benchmark 10-year Treasury yields rose 4 basis points to 4.614% after the data was released, while two-year notes rose 3 basis points to 4.984%. the Fed will keep its benchmark interest rate steady between 5.25% and 5.5% next month in Washington, with the odds of a June rate cut now at just 24.3%. Markets now do not expect the Fed to cut interest rates until at least September.
Last week, the Commerce Department said headline inflation accelerated to 3.5% in March, up from the previous month’s tally of 3.2% and ahead of Wall Street’s forecast of 3.4%. So-called core inflation, which excludes volatile components such as food and energy, held steady at 3.8%, its lowest level in more than two years but higher than Wall Street’s forecast of 3.7%. The monthly reading of 0.4% also exceeded Wall Street expectations and matched February’s reading.
The Fed tracks underlying inflation pressures as part of its mandate of price stability, and year-over-year gains remain roughly double its preferred 2% target. The Labor Department’s March jobs report was also impressive, showing a better-than-expected hiring number of 303,000, with average hourly earnings rising 0.3% and matching the smallest increase since last fall. Meanwhile, the labor force participation rate rose to 62.7%, while the headline unemployment rate fell to 3.8%, a level close to Wall Street expectations.
The national average gas price on Monday was $3.63 per gallon per AAA, up 6 cents from last week, up 19 cents from last month, but still 3 cents lower than it was at this point last year.
US Retail Sales Report: Strong Growth and Positive Inflation Outlook
Retail sales rose 0.7% last month — nearly double what economists expected — after rising 0.9% in February, according to Commerce Department data released Monday. The February figure was revised upwards. This comes after sales fell 1.1% in January, partly affected by bad weather. Excluding gas prices, which have been rising, retail sales still rose strongly by 0.6%.
Government retail data was not adjusted for inflation, which rose 0.4% from February to March, according to the latest government report. Therefore, retailers achieved strong sales gains due to inflation.
Retail sales are not increasing just because prices are rising Americans are actually buying more stuff. This is one of the strongest retail sales reports we’ve seen in the past two years.
Futures jumped seconds after the retail report was released, while bond prices fell due to strong economic signals sent by the US consumer.
Sales at general merchandise stores rose 1.1%, while online sales rose 2.7%. Department stores saw a 1.1% decline. Furniture stores, electronics and appliance stores also reported a decline in sales.
A strong job market and rising wages have fueled household spending, which has also become volatile in the face of rising credit costs and rising prices.
US employers delivered another strong report in March, adding 303,000 workers to their payrolls, fueling hopes that the economy can weather rising prices without succumbing to a recession despite high interest rates.
Job growth last month rose from a revised 270,000 jobs in February and far exceeded the 200,000 jobs economists had expected. By all accounts, it was a huge surge in hiring, and it also highlighted the economy’s ability to withstand the pressures of higher borrowing costs resulting from higher interest rates by the Federal Reserve.
