By Amara Omeokwe
Shoppers extended stimulus-induced spending in April,
maintaining a level of retail sales from the prior month with
increased expenditures on autos and dining out.
Retail sales -- a measure of purchases at stores, at restaurants
and online -- overall were unchanged last month from March, the
Commerce Department reported Friday. That kept spending at the same
pace set by March's upwardly revised 10.7% advance, which was
influenced by government-stimulus money for most households.
"Flat sales going from March to April is still pretty strong.
The level of sales is much higher than before the pandemic," said
Scott Brown, chief economist at Raymond James Financial. "It's
still a sign that consumer spending is pretty healthy at this
Sales were up 2.9% at auto and parts dealers, where shortages in
available cars have driven up prices, and 3% at restaurants and
bars, a positive sign for the hard-hit industry as the U.S. economy
more fully opens.
The leisure and hospitality sector, including restaurants, added
331,000 jobs in April, accounting for much of the country's job
creation last month. Commerce's Friday report showed sales at
restaurants and bars in April were just 2% lower than their levels
in February 2020, just before the pandemic took hold in the
Shoppers otherwise last month cut spending across a range of
retail categories, such as clothing and accessories, furniture, and
sporting goods. Sales at general merchandise stores, such as
big-box retailers, and online retailers also fell.
Separately, industrial production in the U.S. expanded in April
amid strong demand for goods, but the sector continued to be
constrained by supply-chain bottlenecks.
Industrial production -- a measure of factory, mining and
utility output -- rose at a seasonally adjusted 0.7% in April
compared with March, the Federal Reserve said Friday. That was
broadly in line with economists' expectations.
Manufacturing output, the biggest component of industrial
production, increased by 0.4% in April from the prior month. Motor
vehicle and parts production weighed on the overall figure, falling
by 4.3% on month, as the global shortage of semiconductor chips has
led to plants running at less than full capacity.
Americans sharply increased spending on goods earlier in the
pandemic, as people stayed at home amid lockdown orders and social
distancing efforts aimed at combating the virus's spread.
Economists expect spending for services, such as in the leisure and
hospitality industry, to pick up as more people become vaccinated
and as establishments in the services sector are allowed to more
"All of that leads to services spending coming back online in a
really big way," said Tim Quinlan, senior economist at Wells
The surge in retail spending earlier in March came as the
government distributed hundreds of billions in direct cash payments
to households. That was similar to a large jump in retail sales
during January, following a separate round of direct payments
authorized by Congress at the end of 2020.
The stimulus checks "burned a hole through consumers' pockets in
those months and contributed to big, big surges" in retail sales,
Mr. Quinlan said. "The immediate sugar high from the stimulus could
be wearing off."
There are positive signs for the economy as the U.S. moves
toward a full reopening. Claims for unemployment benefits have
continued a downward trajectory to pandemic lows. State and local
governments have further eased restrictions on businesses as
coronavirus vaccines circulate and the number of virus cases
recedes. The Centers for Disease Control and Prevention on Thursday
said fully vaccinated people generally don't need to wear a mask or
socially distance during any indoor or outdoor activities.
Bernard Flynn, owner of Trident Booksellers & Cafe in
Boston, said a pickup in business that he started to see in March
has continued. Sales at the store fell 50% in 2020, earlier in the
pandemic, compared with 2019, Mr. Flynn said. Now, sales are off
about 25%, he said.
Mr. Flynn said he has noticed a rise in visitors who are
travelers staying in nearby hotels, along with other shoppers who
are eager to be out and about.
"People are just so happy to go buy something. We see a lot of
that: People just delighted to be browsing in a bookstore," he
A tracker of credit- and debit-card spending from Bank of
America showed that spending at department stores fell a seasonally
adjusted 28% in April from March, while outlays on clothing and
furniture also fell. Spending at restaurants and lodging jumped,
however, as did outlays on airlines, which were up 23%.
Retail sales, excluding motor vehicles and gas stations, were up
43% in April, compared with the same month in 2020, when parts of
the economy were shut down due to the pandemic, according to
Affinity Solutions, a data firm that tracks credit- and debit-card
Sales at restaurants and bars in April more than doubled over
the year, Affinity's data show. Compared with 2019 levels, the
number of reopened U.S. restaurants has daily hovered above 80%
since late April, according to data from OpenTable, the reservation
The economy's recovery continues to be uneven, however. Hiring
unexpectedly slowed last month. Consumer prices also jumped,
raising concerns that inflation may accelerate faster than the
Federal Reserve anticipates.
"Inflation is a big concern. As we know, as prices go up, that's
going to really erode consumers' purchasing power," said Lindsey
Piegza, chief economist at Stifel.
Fed officials have said the surge in prices is likely temporary
and that the central bank has tools to combat inflation should it
rise too much.
Meanwhile, they have signaled their easy-money policies,
including maintaining low interest rates, will remain in place
until the labor market is more fully healed.
"The Fed can't keep rates low and continue to stimulate growth
-- and raise rates to combat persistently high inflation," Ms.
Piegza said. That potentially causes a policy conundrum for the
Fed, she said.
Meanwhile, some employers have said they are struggling to hire
workers as business picks up.
Mr. Flynn, the Boston business owner, said he is adding workers
in anticipation of further relaxing of government mandates. He said
he recently gave his kitchen staff raises and lifted his starting
wage by $1 to $16 an hour to attract new workers. Since doing so,
he has been able to bring on several new staff, he said.
"We're hiring now, planning on restrictions being lifted," he
said. "As soon as they eliminate restrictions, we're going to be
doing a lot of business. I think the pent-up demand is there," he
Xavier Fontdegloria contributed to this article.
Write to Amara Omeokwe at email@example.com
(END) Dow Jones Newswires
May 14, 2021 10:58 ET (14:58 GMT)
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