Retail Sales Rose Slightly in April After 2 Months’ Decline

U.S. retail sales climbed slightly in April following two months of decline.

Figures from the Commerce Department released Tuesday (May 16) showed spending increasing a seasonally adjusted 0.4% versus March, which saw a 0.7% decline.

Retail sales excluding gas station and auto sales rose 0.6% for the month, while a number of categories monitored in the report showed a drop in sales, including sporting goods and hobbies and home furnishings.

Consumers increased their spending at non-store retailers — a category that includes eCommerce sales — as well as at bars and restaurants.

“Consumers remain inclined to spend though they are becoming more selective in their purchases,” Oren Klachkin, lead U.S. economist for Oxford Economics, wrote Tuesday, per a report by Yahoo Finance.

“A stronger-than-expected handoff to Q2 indicates the main engine of GDP growth continues to hum. However, with storm clouds gathering on the horizon, we think consumer spending will soon run out of steam. We expect a weaker labor market, depleted excess savings buffers, tighter credit standards, and high prices will make consumers less inclined to spend in H2.”

There are already signs that consumers are less willing to spend, as PYMNTS has noted at several points in recent weeks.

Although inflation has moderated somewhat since hitting record highs in July of last year, our research shows 70% of grocery shoppers and 67% of retail customers saying they see “significant price increases in the next 12 months,” while most of these shoppers don’t envision the price outlook improving meaningfully until late into 2024.

That’s in line with Federal Reserve data last week showing that consumers believe inflation will persist for some time, leading higher-income households to reduce their spending expectations.

According to the April “Survey of Consumer Expectations,” report by the Federal Reserve Bank of New York, the data show median household spending growth expectations fell from 5.7% in March to 5.2% in April, the lowest level since September 2021.

Drilling down somewhat, the report found that this drop was driven by people with household incomes above $50,000. Consumers who make between $50,000 to $100,000 expect that spending will grow by 5.1%, while in households making more than $100,000, the expectations dip to 5%.

PYMNTS research also found that consumers were 21% more likely to cut back their spending on retail products than at the grocery store. Sixty percent of consumers say they’ve begun shopping at cheaper retailers, while 35% have chosen to forgo product quality in favor of lower-quality, albeit less-expensive, products.

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