US retail sales rise 0.9% in April in face of sky-high inflation | Retail News

The increase in retail sales was driven by greater sales of cars, electronics, and at restaurants, the US Department of Commerce.

United States retail sales rose 0.9 percent in April, a solid increase that underscores Americans’ ability to keep ramping up spending even as inflation persists at nearly a 40-year high.

The increase was driven by greater sales of cars, electronics, and at restaurants, the Department of Commerce said Tuesday.

Even adjusting for inflation, which was 0.3 percent on a monthly basis in April, sales increased. Petrol prices fell slightly last month, restraining inflation, after soaring in March in the aftermath of Russia’s invasion of Ukraine.

Consumers are providing critical support to the economy even after a year of seeing prices spiral higher for petrol, food, rent, and other necessities. The economy contracted in the first three months of the year, but consumer and business spending still increased at a healthy pace.

Strong hiring, rapid wage increases, and a healthy level of savings — on average — have bolstered consumers’ financial health, despite a sharp increase in consumer prices of 8.3 percent in April compared with a year ago. The increase was just below a four-decade high reached in March.

Still, economists are watching closely to see if consumer spending can continue to outpace inflation. Slower spending would drag down the economy’s growth. While that might bring down inflation, it would also threaten to push the economy into recession.

The retail sales figures suggest that some supply chain snarls may be easing. Sales at auto dealers rose 2.2 percent, and they increased 1 percent at electronics stores and 0.7 percent at furniture stores.

Purchases at online retailers jumped 2.1 percent and they climbed 2 percent at restaurants and bars.

The continuing strength of consumer demand, fueled by a robust labour market, is a key reason the Federal Reserve has accelerated its efforts to tighten credit and cool the economy. By doing so, Fed Chair Jerome Powell hopes to bring down inflation without causing a recession.

The Fed lifted the short-term benchmark interest rate it controls by a half-point at a policy meeting earlier this month, double its usual increase. Powell has also signalled the Fed will likely undertake the fastest pace of interest rate increases in 33 years to bring inflation to heel.