The Consumer Price Index rose 0.4% in March, the Labor Department reported last week in data that was also higher than Wall Street expectations. This means that consumers were able to keep up with the pace of inflation, which reached an annual rate of 3.5% during the month, less than the 4% increase in retail sales.
Excluding auto-related revenue, retail sales jumped 1.1%, well above estimates for a 0.5% increase.
The increase in gas prices helped push the headline retail sales figure higher, with sales rising 2.1% month-on-month at service stations. However, online sales were the biggest area of growth for the month, rising 2.7%, while miscellaneous retailers saw a 2.1% increase.
Multiple categories reported sales declines for the month: sporting goods, hobbies, musical instruments and books posted a 1.8% decline, while clothing stores fell 1.6% and electronics and appliances saw a 1.2% decline.
Stock market futures added to gains after the report, while Treasury yields also rose sharply. The upbeat outlook for the Wall Street open came despite escalating tensions in the Middle East over the weekend as Iran launched air strikes on Israel.
Resilient consumer spending has helped keep the economy afloat despite rising interest rates and concerns about stubborn inflation. Consumer spending represents nearly 70% of US economic output, so it is critical to continued growth in GDP.
Monday's data comes as market concerns grow about the course of monetary policy. Federal Reserve officials have expressed caution about cutting interest rates as inflationary pressures persist, and investors have been forced to lower their expectations for policy easing this year.
Strong consumer spending could prompt the Fed to postpone cuts for longer, said Andrew Hunter, deputy chief U.S. economist at Capital Economics.
“Along with the recent rebound in employment growth, continued consumption resilience is another reason to doubt that the Fed will wait longer before starting to cut interest rates, which we now believe will not even happen,” Hunter said in a note after the Fed's meeting. September”. Release for retail sales.
Market prices, which have been very volatile over the past few weeks, are also pointing to the first cut coming in September, according to CME Group's FedWatch gauge of futures prices.
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