Sales in Retail Shockingly Weak

salesAccording to Census data, retail sales in April were described by economists as “shockingly weak,” hinting at a questionable future for the marketplace. Expectations were for a 0.3 percent increase, yet import prices fell 0.4 percent. Capital Economics contends that although the GDP (Gross Domestic Product) growth in the second quarter was not as large as expected, the weak sales can be attributed to the uncommon inclement weather during the month: and a rebound is expected in the coming months. Capital Economics also cite that significant employment gains suggest the outlook for the market to still be strong.

Retail sales are responsible for a third of consumer spending, and those numbers dropped significantly from March’s successful records. The drop led to a rise in U.S. Treasury debt prices. Economist Guy Berger stated that April was simply a “hangover” from March’s high numbers. Core-sales (which are purchases of GDP excluding automobiles, food, building materials, and gasoline) were down in April by 0.1 percent. The inadequacy of inflation in the economy suggests the Federal Reserve could keep monetary protocol very contained for a brief period of time even as labor market lags begin to calm. Retail sails were the most shockingly weak in the electronics division, who reported a 2.3 percent drop. Furniture purchases reported a drop of 0.6 percent, and food services and drinking establishments receipts fell 0.9 percent. The lack of business in concrete establishments during the April did not translate to an increase in online retail, which reported a 0.9 percent drop. However, automotive transactions increased 0.6 percent in April. Retail in clothing stores increased as well, by 1.2 percent.

The shockingly weak sales foreshadow that consumers may remain cautious during the lethargic recovery of the economy. Consumers account for 70 percent of the economy, so a higher number of purchases will boost the financial recovery. Workers’ wages have not budged much during this period, which might account for the lackluster spending. Compared to the economic recovery growth post World War II (an annual three percent growth), the recovery in today’s market is considerably low. Senior economist Jennifer Lee from BMO Capital Markets stated that the advancement in the marketplace and successful economic recovery are dependent on individuals’ jobs and job security. Lee hypothesized that an increase in jobs will increase consumer spending more than any other strategy.

The shockingly weak retail sales could be attributed to the late Easter and seasonal adjustments. The economy’s lagging recovery has led to the Federal Reserve to curtail its monthly bond purchases. The Federal Reserve is currently purchasing $45 billion bonds each month, as opposed to the $85 billion it used to acquire. The decrease in spending is an attempt to reduce long-term interest rates in the hopes of stimulating borrowing, growth, and spending. Feds are hopeful that as consumer spending increases, this kind of support will not be necessary. Hiring has remained steadily strong in the past three months. 288,000 jobs were added by employers in April, after additions of over 200,000 in the two previous months. Wages have still not budged, yet more paychecks being received by the public have given economists an optimistic view of the future despite the weak sales in April.

By Andres Loubriel

Sources:
ABC News
Bradenton Herald
Business Herald
Reuters

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