Latest wave of stimulus spending fails to spark a rise in spending

American retail sales have slowed down during the month of April, which is becoming a cause for concern for the country’s economic planners.

The slow-down has come as a surprise following a sharp advance in March when pandemic-relief cheques provided millions of Americans with increased spending power. The latest figures coming out of America’s Commerce Department yesterday showed that the value of overall retail purchases were essentially unchanged last month following an upwardly revised 10.7 per cent gain in March.

This represented the second-largest in records back to 1992. The median estimate in a Bloomberg survey of economists called for a one per cent April gain. The total value of retail sales was a record US$619.9 billion in April, supporting economists’ forecasts for strong household spending for the remainder of the year.

Consumers may be shifting spending more towards services

The data suggest that consumers may be shifting more of their spending money to services such as entertainment and travel supported by elevated savings by fiscal stimulus. This shift has come about as pandemic fears dissipate.

BMO Capital Markets Senior Economist, Sal Guatieri said in a note that, “American shoppers took a breather in April after splurging earlier this year after two rounds of big stimulus payments… . But with more than half of the states now fully open for business and more quickly advancing their schedules, shoppers won’t be staying home for long”.

Eight of 13 retail categories registered declines in April sales, with the largest percentage decrease at clothing stores, which dropped 5.1 per cent after a 22.7 per cent surge. Sales at non-store retailers, which include e-commerce, fell 0.6 per cent in April while general merchandise store sales fell 4.9 per cent and the value of purchases at sporting goods outlets dropped 3.6 per cent.

Gas station receipts decreased 1.1 per cent. A separate report yesterday showed that US manufacturing output rose in April by slightly more than expected, suggesting further improvement for factories that are otherwise buffeted by supply shortages and shipping challenges.

Purchases at restaurants and auto dealers increased, while sales at motor vehicle and parts dealers climbed 2.9 per cent in April, even as automakers faced production constraints due to the global semiconductor shortage.

So-called control group sales, which exclude more volatile categories including food services, car dealers, and gasoline stations, dropped 1.5 per cent in April after an upwardly revised 7.6 per cent jump in March.