April US retail spending hits new record but lands below estimates as stimulus fades

• US retail sales edged slightly higher in April as the boost from March stimulus lapsed.
• But they missed the median estimate of 1% growth from economists surveyed by Bloomberg.
• Although sales remain at a record high as the economy reopens, the monthly increase was just $136,000.

Americans' spending at retailers rose to a fresh record high last month as the stimulus bump faded and the country reopened further, although they did not rise as much as economists expected.

Retail sales in the US were virtually unchanged in April, the Census Bureau announced Thursday. The median estimate from economists surveyed by Bloomberg was for a 1% gain. The reading places monthly sales at $619.9 million, a new record high just $136,000 above the one seen in March.

The reading also marks a second straight gain. March's jump was revised higher to 10.7%.

The April reading sits roughly 46% higher than the year-ago sum. Retail sales hit their pandemic-era floor in April before partial reopening in some states and warmer weather powered a V-shaped bounce for the gauge.

The Friday data also continues a pattern of sharp stimulus-fueled bounces and subsequent slowdowns. The $900 billion aid package signed by President Donald Trump in the last days of 2020 drove spending higher in January before it contracted in February. Democrats' $1.9 trillion stimulus plan seemingly repeated the trend, with March's blowout spending boom giving way to weaker sales in April.

The government's monthly retail sales report has taken on new significance during the pandemic. While factories quickly rebounded from virus-related lockdowns, the service industry struggled through months of harsh restrictions and weak traffic. Consumer spending counts for about 70% of economic activity in the US, making retail sales one of the most relevant gauges of the broader recovery.

With spending comes inflation

Sales have trended at elevated levels since the country began reversing lockdown measures at the start of the year. With spending above pre-pandemic highs, focus has shifted toward inflation and how booming demand could hinder the recovery.

Price growth is already accelerating more than economists expected. The Consumer Price Index - a popular measure of nationwide inflation - rose 0.8% last month, handily surpassing the median estimate of a 0.2% jump. The reading marks the fastest rate of price growth since 2009.

The core index, which excludes volatile food and energy prices, rose 0.9%, the largest month-over-month gain since 1982.

Members of the Biden administration and Federal Reserve officials have long said that reopening will likely drive temporarily stronger inflation before price growth cools. The Wednesday inflation data fits such a narrative, and economists see price growth accelerating further into the summer.

Conservative economists and some moderate Democrats continue to raise concerns that historic stimulus and sudden reopening will spark a dangerous inflationary spiral akin to that which crippled the US in the 1970s. While it's still too early to tell whether such a crisis will emerge, data from the Wednesday report suggests stronger inflation won't last.

Rising prices for used vehicles counted for roughly one-third of the increase as the US faces a shortage of cars and trucks. Additionally, bottlenecks throughout the manufacturing sector have curbed businesses' ability to meet skyrocketing demand.

The items that fueled stronger-than-expected inflation in April also suggest the jump will be transitory. Aside from used vehicles, rising prices for airline tickets, lodging, and recreation powered the increase. Demand for such sectors is expected to be mostly pent up from months of activity being restricted, and economists see spending on those items cooling as the country settles into a new normal.