Consumers sustaining economic recovery in US

US RETAIL sales rose for the seventh month running in April, signalling that consumers are sustaining the recent momentum that has helped solidify the economic recovery.

Separately yesterday, data on consumer sentiment, business inventories and industrial production showed growing optimism and strengthening demand.

Sales rose 0.4 per cent last month, according to US commerce department figures, doubling economists’ expectations, and were propelled by a recent surge in demand for construction materials. Retail sales were up by 8.8 per cent from the same month a year ago.

“We do look to have crossed the Rubicon where the consumer recovery is self-sustaining,” said Alan Ruskin of RBS Securities.

The April gain was less than March’s revised rise of 2.1 per cent. Last month, excluding car sales, retail sales were up 0.4 per cent.

Americans spent more on building materials and garden equipment in April, shopped more at health and personal care stores, and paid more for petrol.

They steered away from sporting goods, clothing, accessories and electronics.

Economists watch retail sales closely as a key measure of consumer spending. High unemployment had suppressed spending during the recession but, in the first quarter, spending increased by 3.6 per cent, accounting for much of the rise in overall output.

Mr Ruskin said he expected spending to rise more than 3 per cent again in the second quarter, since employers were finally expanding staff hours.

US labour department figures showed that, last month, the US economy added 290,000 jobs but the unemployment rate rose to 9.9 per cent as more workers entered the jobs market.

“With household balance sheets still overleveraged, the key determinant of consumer spending growth . . . will be the pace of the recovery in the labour market and hence the path of wage and salary income,” said Joshua Shapiro, chief US economist at MFR.

A Reuters/University of Michigan survey yesterday showed consumer sentiment ticking up this month from 72.2 to 73.3. Renewed demand is spurring activity, with companies expanding inventories and sales in March and output climbing in April.

“Industrial production kicked off the second quarter with a bang and, even though some ripple effects from the European crisis will wash ashore in the form of lower export momentum, there are significant offsets in terms of strong domestic demand,” said Brian Bethune, chief US financial economist at IHS Global Insight. – (Copyright The Financial Times Limited 2010)