Rise in Retail Sales Improves U.S. Economic Outlook

Rise in Retail Sales improves the economic outlook of U.S.

Rise in Retail Sales improves the economic outlook of U.S.

Americans purchased more electronics, began home improvement projects, updated wardrobes, inspired by warmer weather and a healthier job market.  Americans shrugged off high gasoline prices in March and spent more strongly than expected. This has led to an economic growth in the first quarter which probably was not as weak as many had feared.

The Commerce Department said Monday that there was 0.8 percent rise noticed in retail sales increased 0.8 percent, after rising 1.0 percent in February. Some of the increase went to higher gas prices. Still, steeper gas prices haven’t deterred Americans from spending more on other goods. Economist expectations were handily beaten by the last months gain, for only a 0.3 percent rise and indicated sturdy consumer spending in the first three months of 2012.

Consumers spent more last month on building materials, autos, electronics, furniture and clothing. Excluding car and gasoline sales, retail sales increased 0.7 percent. And excluding autos, gas, and home supplies, so-called “core” sales rose 0.5 percent in March, matching February’s gain. U.S. Consumer spending accounts for more than two-third of its economic activity.

Joel Naroff, chief economist at Naroff Economic Advisors, “Retail sales soared in March with stores in just about every category recording sharp increases over February levels. And let’s not forget, the February spending was strong”.

Stronger retail sales in March added to a mixed day of trading on Wall Street. The Dow Jones industrial average closed up roughly 72 points to end the day at 12,921.But the Standard & Poor’s 500 index ended the day essentially flat, while the Nasdaq composite fell 23 points.

Growth in Sales based on Boards

Last month’s sales rise was broad-based, even though Americans paid 27 cents more per gallon of gasoline than they did a month earlier. So far, Americans appear to be taking rising gasoline prices in pace, due to a soft winter that has pushed down natural gas prices and cut household heating bills.

Economists believe that the signs of strength in consumer spending reduced the chances of further monetary easing by the Federal Reserve through bond purchases, or quantitative easing, even though job growth slowed in March. The U.S. central bank meets next week and is not expected to make any major policy announcement.

Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York said, “The sales data indicates, at the moment, that no additional quantitative easing is needed. It’s simply just not necessary”.

Motor vehicle sales extended the prior month’s gains. However, the 0.9 percent rise in sales was at odds with data from dealers showing a decline in unit sales. Excluding autos, retail sales climbed 0.8 percent last month after advancing 0.9 percent in February. Americans stepped up shopping last month. Retail merchants reported a 4.1 percent increase in sales in March compared to a year ago, according to a tally of 22 retailers by the International Council of Shopping Centers.

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Dhwani Shah

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