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U.S. Retail Spending Unchanged in April -- 2nd Update

05/14/2021 | 08:39am EDT

By Amara Omeokwe

Shoppers extended stimulus-induced spending in April, maintaining a level of retail sales from the prior month with increased expenditures on autos and dining out.

Retail sales -- a measure of purchases at stores, at restaurants and online -- overall were unchanged last month from March, the Commerce Department reported Friday. That kept spending at the same pace set by March's upwardly revised 10.7% advance, which was influenced by government-stimulus money for most households.

"Flat sales going from March to April is still pretty strong. The level of sales is much higher than before the pandemic," said Scott Brown, chief economist at Raymond James Financial. "It's still a sign that consumer spending is pretty healthy at this point."

Sales were up 2.9% at auto and parts dealers, where shortages in available cars have driven up prices, and 3% at restaurants and bars, a positive sign for the hard-hit industry as the U.S. economy more fully opens.

The leisure and hospitality sector, including restaurants, added 331,000 jobs in April, accounting for much of the country's job creation last month. Commerce's Friday report showed sales at restaurants and bars in April were just 2% lower than their levels in February 2020, just before the pandemic took hold in the U.S.

Shoppers otherwise last month cut spending across a wide range of retail categories, such as clothing and accessories, furniture, and sporting goods. Sales at general merchandise stores, such as big-box retailers, and online retailers also fell.

Separately, industrial production in the U.S. expanded in April amid strong demand for goods, but the sector continued to be constrained by supply-chain bottlenecks.

Industrial production -- a measure of factory, mining and utility output -- rose at a seasonally adjusted 0.7% in April compared with March, the Federal Reserve said Friday. That was broadly in line with economists' expectations.

Manufacturing output, the biggest component of industrial production, increased by 0.4% in April from the prior month. Motor vehicle and parts production weighed on the overall figure, falling by 4.3% on month, as the global shortage of semiconductor chips has led to plants running at less than full capacity.

Americans sharply increased spending on goods earlier in the pandemic, as people stayed at home amid lockdown orders and social distancing efforts aimed at combating the virus's spread. Economists expect spending for services, such as in the leisure and hospitality industry, to pick up as more people become vaccinated and as establishments in the services sector are allowed to more fully operate.

"All of that leads to services spending coming back online in a really big way," said Tim Quinlan, senior economist at Wells Fargo.

The surge in retail spending earlier in March came as the government distributed hundreds of billions in direct cash payments to households. That was similar to a large jump in retail sales during January, following a separate round of direct payments authorized by Congress at the end of 2020.

The stimulus checks "burned a hole through consumers' pockets in those months and contributed to big, big surges" in retail sales, Mr. Quinlan said. "The immediate sugar high from the stimulus could be wearing off."

Xavier Fontdegloria contributed to this article.

Write to Amara Omeokwe at amara.omeokwe@wsj.com

(END) Dow Jones Newswires

05-14-21 1039ET

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