US retail sales increase solidly in February

[WASHINGTON] US retail sales increased solidly in February as motor vehicle purchases rebounded and temperatures warmed up, but surging oil prices because of war in the Middle East could crimp spending in the months ahead.

Retail sales rose 0.6 per cent after a revised 0.1 per cent dip in January, the Commerce Department’s Census Bureau said on Wednesday (Apr 1). Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, rising 0.5 per cent after a previously reported 0.2 per cent drop in January.

The Census Bureau is still catching up on data releases following delays caused by last year’s government shutdown. The US-Israeli war with Iran has sent global oil prices surging more than 50 per cent, and the national average retail ​oil price topped US$4 a gallon for the first time in more than three years.

There are concerns that if oil prices continue to rise, they could offset some of the anticipated boost to consumer spending and the overall economy from tax cuts.

The month-long conflict has also reduced household net worth, with the S&P 500 index and Dow Jones Industrial Average in March posting their biggest monthly decline in a long time.

Higher-income households have led consumer spending, underpinned by robust wealth levels. Retail sales excluding automobiles, oil, building materials and food services increased 0.5 per cent in February after rising 0.2 per cent in January.

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These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Consumer spending slowed in the fourth quarter, helping to hold back GDP growth to a 0.7 per cent annualised rate. The economy grew at a 4.4 per cent pace in the third quarter. REUTERS