Retail Sales Remain Strong in March
Sales by U.S. retailers were surprisingly strong in March, while soaring energy costs caused a spike in wholesale prices, the government said Thursday in reports that reinforced the expectation of more U.S. interest rate rises.
The Commerce Department said retail sales picked up 0.4% to a seasonally adjusted $269.23 billion last month. Excluding a slump in new cars after four straight months of big sales gains, the figure was 1.4%.
That followed upwardly revised sales gains of 1.8% in February and 0.7% in January, underscoring the powerful thrust the expansion is receiving from consumer spending, which fuels two-thirds of national economic activity.
“Nothing seems to slow the consumer down,” said economist Joel Naroff of Naroff Economic Advisors in Holland, Pa. “Spending in the first quarter was once again out of this world.”
In a separate report, the Labor Department said its March producer price index jumped 1% in March, matching February’s increase. But the closely watched core rate, which strips out volatile energy and food costs, added only a tame 0.1%, down from 0.3% in February.
Analysts said the wholesale price rise was not threatening, because so much of it could be traced to energy costs that appear to have peaked or to be near a peak. Imported oil prices hit $32 a barrel in mid-March but on Monday this week were down to $23.85 in the wake of a March 28 agreement by the Organization of Petroleum Exporting Countries to boost output.
“If you look, however, at the underlying cost structure of American business, I see no evidence of an acceleration in unit costs,” Federal Reserve Chairman Alan Greenspan told Congress.
Meanwhile, the number of Americans filing for jobless benefits was little changed last week, keeping the level low enough to suggest workers aren’t having trouble finding jobs, the Labor Department also reported Thursday. The number of claims filed for the first time rose 3,000 last week to 264,000 from a level that was the lowest in a generation.
With the economy now in a ninth year of steady growth since a recession ended in March 1991, much of the pressure comes from free-spending consumers whose incomes have been bolstered by ample jobs, rising incomes and fat stock-market profits.
The retail sales report showed strong March spending increases on a wide range of goods, from building materials and clothing to food and drugstore items.
Economist David Orr of First Union Corp in Charlotte, N.C., said retail sales were growing at an annual rate of more than 15% in the first quarter. “If that’s not overheating, what is?” he asked rhetorically.
New-car sales, which account for about one-quarter of monthly retail business, dropped 2.6% to $67.19 billion in March. But that followed four months of lofty gains.
With the spring construction season at hand, March sales of building materials shot up 3.8% to $15.97 billion, more than recovering from a 1.5% dip in February.
Reflecting higher prices, gasoline sales surged 4% to $18.32 billion after soaring 6.8% in February. In the one-year period to March 31, gas prices climbed 31.2%, the biggest annual rise in nearly two decades, the Commerce Department said.
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Producer Prices
Index of finished goods prices; 1982=100; seasonally adjusted:
March: 137.7
Source: Bureau of Labor Statistics
