U.S. retail sales were flat in April as households cut back on purchases of automobiles and other big-ticket items, indicating the economy was struggling to rebound strongly after barely growing in the first quarter.
The weak retail sales report from the Commerce Department, and other data on Wednesday showing the 10th straight month of declining import prices in April, suggest little urgency for the Federal Reserve to start raising interest rates.
“In terms of the Fed, the sluggish spending and economic growth performance will continue to argue for a later start to liftoff, essentially ruling out a mid-year hike,” said Millan Mulraine, deputy chief economist at TD Securities in New York.
While March’s retail sales were revised higher to show a 1.1 percent increase instead of the previously reported 0.9 percent rise, that was not enough to offset the general weak tone of the report. Economists had forecast sales up 0.2 percent in April.
Futures markets continued to show that traders do not expect an interest rate hike until December at the earliest. The dollar fell against the euro and the yen, while prices for U.S. Treasury debt rose. U.S. stocks were trading higher.
Retail sales excluding automobiles, gasoline, building materials and food services were also unchanged after an upwardly revised 0.5 percent increase in March.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Economists had forecast core retail sales rising 0.5 percent in April after a previously reported 0.4 percent increase in March.
Retail sales have trended weaker despite households getting a massive windfall from lower gasoline prices. Consumers appear to have saved much of the money from the cheaper gasoline.
“The continuing weakness of retail sales in April brings into question our working assumption that the soft patch through the winter months was largely due to the unseasonably cold temperatures,” said Paul Ashworth, chief economist at Capital Economics in Toronto.