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US retail sales rise in April on cars, clothing

Published: Tuesday, July 28 2015 12:41 a.m. MDT

In this April 10, 2013 photo, a woman walks past a retail store's window display in Baltimore. Despite less pay, US consumers keep spending, thanks to cheaper gas, rising stocks, low rates.  On Friday, April 26, 2013, the government said consumers spent 3.2 percent more on an annual basis in the January-March quarter than in the previous quarter, the biggest jump in two years.  (AP Photo/Patrick Semansky) (Associated Press) In this April 10, 2013 photo, a woman walks past a retail store's window display in Baltimore. Despite less pay, US consumers keep spending, thanks to cheaper gas, rising stocks, low rates. On Friday, April 26, 2013, the government said consumers spent 3.2 percent more on an annual basis in the January-March quarter than in the previous quarter, the biggest jump in two years. (AP Photo/Patrick Semansky) (Associated Press)

WASHINGTON — Americans increased their spending in April at retail businesses, buying more cars and clothes while paying less for gas. The rebound from a weak March suggests consumers may help boost economic growth again this spring.

Retail sales edged up 0.1 percent in April from March, the Commerce Department said Monday. That's an improvement from a 0.5 percent decline in March, which was the largest drop in nine months.

The April gain was stronger when taking out the effect of lower gas prices, which reduced sales at gas stations 4.7 percent — the largest decline since December 2008. The retail sales report is not adjusted for price changes.

When excluding gas station sales, retail spending rose 0.7 percent. And core retail sales, exclude gas, autos and building supplies, increased 0.5 percent. Economists pay close attention to core sales because they strip out the most volatile categories.

FILE- In this June 15, 2012, file photo, a woman walks into a Lane Bryant store in San Jose, Calif. Americans cut their spending at retail businesses for a third straight month, as a weak job market made consumers more cautious. Retail sales fell 0.5 percent in June from May, the Commerce Department said Monday, July 16, 2012. Consumers spent less on autos, furniture, appliances, building and garden supplies and other items from department stores.  (Paul Sakuma, File, Associated Press) FILE- In this June 15, 2012, file photo, a woman walks into a Lane Bryant store in San Jose, Calif. Americans cut their spending at retail businesses for a third straight month, as a weak job market made consumers more cautious. Retail sales fell 0.5 percent in June from May, the Commerce Department said Monday, July 16, 2012. Consumers spent less on autos, furniture, appliances, building and garden supplies and other items from department stores. (Paul Sakuma, File, Associated Press)

Sales of autos rose 1 percent in April, rebounding from a 0.6 percent drop in March. Sales at clothing stores increased 1.2 percent and sales at general merchandise stores, a category that covers department stores, rose 1 percent. Sales were also strong at building materials and garden supply stores and electronics and appliance stores.

Consumers increased their spending in April, despite paying higher Social Security taxes that has reduced their paychecks this year. Their spending will likely add to economic growth in the April-June quarter. Consumer spending makes up roughly 70 percent of economic activity.

"This is a good start to the second quarter," said Jennifer Lee, senior economist at BMO Capital Markets. "The rest of the year is expected to rise further on stronger household finances."

The economy grew at a 2.5 percent annual rate from January through March, up from a 0.4 percent rate in the October-December quarter of 2012. The gain was largely because of the fastest growth in consumer spending in more than two years.

In this Friday, Nov. 23, 2012 photo, a cashier hands a customer his change and receipt during a transaction at a Sears store, in Henderson, Nev. Consumers spent and earned more in November, reflecting a rebound from the disruptions caused by Superstorm Sandy. The Commerce Department says, Friday, Dec. 21, 2012, consumer spending rose 0.4 percent compared with October. Personal income jumped 0.6 percent, the biggest gain in 11 months. (AP Photo/Julie Jacobson) (Associated Press) In this Friday, Nov. 23, 2012 photo, a cashier hands a customer his change and receipt during a transaction at a Sears store, in Henderson, Nev. Consumers spent and earned more in November, reflecting a rebound from the disruptions caused by Superstorm Sandy. The Commerce Department says, Friday, Dec. 21, 2012, consumer spending rose 0.4 percent compared with October. Personal income jumped 0.6 percent, the biggest gain in 11 months. (AP Photo/Julie Jacobson) (Associated Press)

But most of the increase came from greater spending at the start of the quarter. Consumers cut back sharply on retail spending in March, while paying more for utilities to heat their homes during a colder-than-usual month.

Some economists had worried that the weak month of spending in March was a sign that the tax increase was starting to catch up with the consumer.

But other factors appear to have made the consumer more resilient.

Chris G. Christopher Jr., director of consumer economics at IHS Global Economics, said that falling gas prices and an improving job market have cushioned some of the impact of the higher Social Security taxes.

The economy added 165,000 jobs in April and has created an average of 208,000 jobs a month since November. That's well above the monthly average of 138,000 for the previous six months.

In this Tuesday, April 9, 2013 photo, a shopper looks over the clothes at the Vermont Trading Company in Montpelier, Vt. U.S. retail sales fell in March from February by the most in nine months, indicating higher taxes and weak hiring have made consumers more cautious about spending, according to the Commerce Department, on Friday, April 12, 2013.  (Toby Talbot, Associated Press) In this Tuesday, April 9, 2013 photo, a shopper looks over the clothes at the Vermont Trading Company in Montpelier, Vt. U.S. retail sales fell in March from February by the most in nine months, indicating higher taxes and weak hiring have made consumers more cautious about spending, according to the Commerce Department, on Friday, April 12, 2013. (Toby Talbot, Associated Press)

Cheaper gas is leaving consumers with more disposable income. The national average price has risen slightly over the past week to $3.58 a gallon. But it is still 21 cents lower than the peak price reached on Feb. 27.

And a surging stock market and increases in home prices may be making consumers feel wealthier and more inclined to spend.

Most economists still expect growth to weaken slightly in the April-June quarter. But after seeing the more upbeat retail sales figures for April, some are raising their forecasts. Analysts at JPMorgan now predict growth will slow to a 2 percent rate, up from their previous forecast of 1.5 percent.

And many expect economic growth will strengthen in the second half of the year.

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