Apr 17, 2017
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US retail sales fell but clothing sales rose in March

Apr 17, 2017

US retail sales fell for a second straight month in March and consumer prices dropped for the first time in just over a year, underscoring the magnitude of the loss of economic growth momentum in the first quarter.

Some US retailers may be under pressure but shoppers are stil buying fashion - Wikimedia

But receipts at clothing stores increased by the most in a year, despite declining mall traffic and increased competition from online retailers, led by Amazon.com. Retailers like J.C. Penney Co Inc, Abercrombie & Fitch and Macy's Inc are scaling back on brick-and-mortar operations but due to e-tail's growth, but the latest figures show fashion stores still matter and shoppers are still buyign clothes.

And with the labor market near full employment, Friday's overall weak report failed to change views that the Federal Reserve will raise interest rates again in June as economists expect a rebound in both retail sales and monthly inflation.

"For the Fed, the underlying momentum is more important in terms of policy decisions, and that looks to be strong, supported by a tightening labor market, rising incomes and high consumer confidence," said Gregory Daco, head of US macroeconomics at Oxford Economics in New York.

The Commerce Department said retail sales dropped 0.2% last month after a 0.3% decrease in February, which was the first and biggest decline in nearly a year. But compared to March last year retail sales increased 5.2%.

Economists had forecast retail sales slipping 0.1%. Excluding automobiles, gasoline, building materials and food services, retail sales rebounded 0.5% last month after falling 0.2% in February.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Despite last month's rebound in core retail sales, consumer spending likely braked sharply in the first quarter after growing at a brisk 3.5% annualized rate in the final three months of 2016. The apparent slowdown in consumption is partly blamed on the late disbursement of income tax refunds by the government as it sought to combat fraud.

The Atlanta Fed lowered its first-quarter GDP estimate by one-tenth of a percentage point to a 0.5% rate, which would be the weakest performance in three years. The economy grew at a 2.1% pace in the fourth quarter.

With job growth averaging 178,000 per month in the first quarter, the anticipated slowdown in GDP likely understates the health of the economy. First-quarter GDP tends to be weaker because of calculation problems that the government has acknowledged and is working to resolve.


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