WASHINGTON: U.S. retail sales unexpectedly fell in April as households cut back on purchases of motor vehicles and a range of other goods, pointing to a slowdown in economic growth after a temporary boost from exports and inventories in the first quarter.
The moderation in economic activity was underscored by other data on Wednesday showing a drop in industrial production last month. The economy is slowing as the stimulus from the White House's US$1.5 trillion tax cut package fades.
President Donald Trump's escalating trade war with China, which triggered a steep U.S. stock market sell-off, is seen hurting business confidence and undercutting spending on equipment. Following the weak reports on Wednesday, some economists cut their second-quarter growth estimates.
"Not a great start to the current quarter, suggesting GDP growth downshifted to a 1.5per cent (annualized rate) in the second quarter from 3.2per cent (pace) in first quarter," said Sal Guatieri a senior economist at BMO Capital Markets in Toronto.
The Commerce Department said retail sales slipped 0.2per cent last month. Data for March was revised slightly up to show retail sales surging 1.7per cent, the largest increase since September 2017, instead of the previously reported 1.6per cent jump.
Economists polled by Reuters had forecast retail sales gaining 0.2per cent in April. Retail sales in April increased 3.1per cent from a year ago.
The dollar was trading slightly higher against a basket of currencies. U.S. Treasury prices rose, while stocks on Wall Street fell.
Excluding automobiles, gasoline, building materials and food services, retail sales were unchanged in April after an upwardly revised 1.1per cent acceleration in March.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported to have soared 1.0per cent in March.
SLOWER CONSUMER SPENDING
Consumer spending accounts for more than two-thirds of economic activity. While March's strong core retail sales set consumer spending on an upward trajectory in the second quarter, last month's weakness suggested the pickup in consumption could be moderate.
Morgan Stanley cut its consumer spending growth estimate for the second quarter to a 1.6per cent annualized rate from a 2.0per cent pace. The bank lowered its second-quarter GDP growth estimate to a 1.2per cent rate from a 1.5per cent pace.
Consumer spending grew at a 1.2per cent annualized rate in the first quarter, the slowest in a year. The economy grew at a 3.2per cent pace in the January-March quarter.
In separate report on Wednesday, the Federal Reserve said industrial production fell 0.5per cent in April after rising 0.2per cent in March. Manufacturing output dropped 0.5per cent last month as motor vehicles and parts production tumbled 2.6per cent. Manufacturing production was unchanged in March.
In April, sales at auto dealerships dropped 1.1per cent after accelerating 3.2per cent in the prior month, the Commerce Department said Online and mail-order retail sales dropped 0.2per cent last month.
Sales at building materials and garden equipment and supplies dealers tumbled 1.9per cent. Receipts at clothing stores slipped 0.2per cent, likely reflecting deep price discounting by retailers trying to work off excess inventory. Households also spent less on personal grooming.
Sales at furniture outlets were flat. But receipts at service stations increased 1.8per cent, likely boosted by more expensive gasoline. Receipts at hobby, musical instrument and book stores gained 0.2per cent.
Sales at bars and restaurants climbed 0.2per cent.
(Reporting by Lucia Mutikani; Additional reporting by Jason Lange; Editing by Andrea Ricci)