WASHINGTON (Reuters) - Retail sales showed unexpected vigor in March as Americans shrugged off high gasoline prices and bought a range of goods, suggesting economic growth in the first quarter was probably not as weak as many had feared.
Retail sales increased 0.8 percent, the Commerce Department said on Monday, after rising 1.0 percent in February.
Last month’s gains, which surpassed economists’ expectations for only a 0.3 percent rise, could prompt analysts to raise their forecasts for first-quarter consumer spending, the main driver of the economy.
The economy grew at an annual rate of 3.0 percent rate in the fourth quarter and growth in the Jan-March period was seen at around 2.5 percent.
“It’s a clear sign that U.S. consumer spending remains strong. On balance I think it’s the latest sign here that the economy is outpacing a lot of its major counterparts in recovery,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
However, the growing optimism over the economy was tempered by a separate report showing that manufacturing in New York state slowed sharply this month as shipments of goods weakened.
Factories, however, hired more workers and received higher prices for their goods, giving the report a mixed tone.
The New York Federal Reserve Bank said on Monday its “Empire State” manufacturing activity index fell in April to 6.56, the lowest reading in five months, from 20.21 in March.
“We’ll have to see if that’s a one-off or the start of a trend. If manufacturing slows down, that will certainly be a headwind to the economy,” said Wayne Kaufman, chief market analyst at John Thomas Financial in New York.
Another report also showed confidence among homebuilders slipped in April for the first time in seven month amid expectations of a slower sales pace in the next six months.
Stocks on Wall Street were narrowly mixed in early dealings, while prices for Treasury debt were little changed. The dollar rose modestly against a basket of currencies.
The rise in sales last month was broad-based, even though Americans paid 27 cents more per gallon of gasoline than they did the prior month.
So far, Americans appear to be taking rising gasoline prices in stride, thanks to a mild winter that has cut heating bills.
Motor vehicle sales rose 0.9 percent after increasing 1.3 percent in February. Auto sales have accelerated in recent months, boosted by pent-up demand by households.
A devastating earthquake and tsunami in Japan caused disruptions to auto production last year and left dealers without models that consumers wanted to buy.
Excluding autos, retail sales climbed 0.8 percent last month after advancing 0.9 percent in February.
Elsewhere, gasoline sales receipts increased 1.1 percent after rising 3.6 percent in February. The rise in gasoline sales reflected high prices at the pump.
Excluding autos and gasoline, sales advanced 0.7 percent in March, adding to the prior month’s 0.5 percent gain.
Details of the report showed some strength, suggesting consumer spending will continue to support growth.
Last month, clothing store receipts rose 0.9 percent, while sales at building materials and garden equipment suppliers jumped 3.0 percent - the largest gain since December.
Unseasonably mild weather has helped to boost sales at clothing retailers as well as purchases of building materials and garden equipment.
So-called core retail sales, which exclude autos, gasoline and building materials, rose 0.5 percent after increasing by the same margin in February.
Core sales correspond most closely with the consumer spending component of the government’s gross domestic product report.
Sales at restaurants and bars edged up 0.3 percent, while receipts at sporting goods, hobby, book and music stores rose 0.5 percent. Sales of electronics and appliances increased 1.0 percent, the largest gain since October, while receipts at furniture stores climbed 1.1 percent.
A second report from the Commerce Department showed business inventories increased 0.6 percent to a record $1.58 trillion as auto dealers restocked to meet increased demand for motor vehicles from consumers.
Business sales increased 0.7 percent to a record $1.24 trillion in February, after advancing 0.4 percent the prior month. At February’s sales pace it will take 1.28 months for businesses to clear shelves, unchanged from January.
Additional reporting by Leah Schnurr, Luciana Lopez and Ryan Vlastelica in New York:; Editing by Andrea Ricci