- Retail sales increase 0.5% in April, in line with expectations
- Core retail sales also rise 0.5%, fourth straight monthly gain
- Weekly jobless claims climb 12,000 to 211,000
- Import prices jump 1.9% in April; up 4.2% year-on-year
WASHINGTON, May 14 (Reuters) - U.S. retail sales increased solidly for a third straight month in April, though part of the rise in receipts was due to soaring inflation amid the war with Iran.
Rising price pressures were underscored by other data on Thursday showing imported inflation last month rose at its fastest pace in four years. Larger tax refunds this year as well as a strong stock market performance are providing a cushion for households against rampant inflation.
But surging prices are outpacing wage gains and households are rapidly drawing down their tax refunds, leaving economists to anticipate a slowdown in spending.
"Wealth effects and personal income tax cuts continue to prop up American consumer spending, but rising inflation and elevated longer-term interest rates could begin to weigh more heavily," said Sal Guatieri, a senior economist at BMO Capital Markets.
Retail sales rose 0.5% last month after a downwardly revised 1.6% jump in March, the Commerce Department's Census Bureau said. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, gaining 0.5% after a previously reported 1.7% increase in March.
Retail sales increased 4.9% year-on-year in April. Economists estimated that sales adjusted for inflation dipped 0.1% last month and were up 1.1% from a year ago.
The U.S.-Israeli conflict with Iran has disrupted shipping in the Strait of Hormuz, driving up prices of energy and other commodities, including fertilizer and aluminum. The government reported this week that consumer prices increased strongly for a second straight month in April, with the annual rate posting its largest gain in three years.
Last month's advance in retail sales was led by electronics and appliance stores, where receipts increased 1.4%. Sales at nonstore retailers, which include online retailers, rose 1.1%. Receipts at gasoline stations increased 2.8% after surging 13.7% in March. Gasoline prices rose 12.3% in April, data from the U.S. Energy Information Administration showed.
Consumers also increased their discretionary spending, with sales at sporting goods, hobby, musical instrument and book stores shooting up 1.4%. Receipts at food services and drinking places, the only services component in the report, rose 0.6%. Economists view dining out as a key indicator of household finances.
U.S. stocks opened higher. The dollar rose against a basket of currencies. U.S. Treasury yields fell.
LARGER TAX REFUNDS PROVIDING A CUSHION
Though the pain at the pump is yet to meaningfully pull spending away from other areas, the buffer from tax refunds is diminishing. The average tax refund was up $323 through April 25 compared to the same period in 2025, Internal Revenue Service data showed.
Economists at PNC Financial said an analysis of internal data showed "consumers are drawing down tax refunds more rapidly than last year, particularly among lower-income households," adding they were seeing "less of those refunds being used towards paying down credit card and other debt."
Lower-income consumers disproportionately spend more on gasoline relative to higher-income households.
While layoffs remain low and the labor market is generating steady wage gains, incomes are being eroded by high inflation. First-time applications for state unemployment benefits rose 12,000 to a still-low seasonally adjusted 211,000 for the week ended May 9, the Labor Department said in a separate report.
Inflation outpaced wage growth in April for the first time in three years. Sales at clothing and clothing accessories stores fell 1.5%, the retail sales report showed. Receipts at furniture and home furnishings retailers dropped 2.0%, while those at auto dealerships fell 0.4%.
Retail sales excluding automobiles, gasoline, building materials and food services rose 0.5% in April after an upwardly revised 0.8% increase in March. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product, and were previously reported to have advanced 0.7% in March.
Economists estimated that core retail sales rose only 0.1% last month after adjusting for inflation.
Consumer spending, which accounts for more than two-thirds of the economy, increased at a 1.6% annualized rate in the first quarter, decelerating from the October-December quarter's 1.9% growth pace. It has cooled from the 3.5% growth rate notched in the third quarter of 2025.
A third report from the Labor Department's Bureau of Labor Statistics showed import prices increased 1.9% last month, the largest gain since March 2022, after rising 0.9% in March.
In the 12 months through April, import prices vaulted 4.2%. That reading was the largest year-on-year rise since October 2022, and followed a 2.3% increase in March.
Prices of imported fuel jumped 16.3% last month, the largest advance since March 2022, after rising 10.0% in March. Prices of imported food increased 0.9%. Excluding food and energy, import prices shot up 0.7% after gaining 0.2% in March. The so-called core import prices rose 3.3% in the 12 months through April.
The government also reported this week that producer prices recorded their largest rise in four years in April.
Accelerating inflation cemented financial market expectations that the Federal Reserve would keep its benchmark overnight interest rate in the 3.50%-3.75% range into 2027.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
Source: Reuters