U.S. Economy: Retail Sales Climb, Inflation Remains Contained
By Timothy R. Homan and Shobhana Chandra
April 14 (Bloomberg) -- Americans heartened by an improving job market flocked to shopping malls and auto showrooms in March, raising the odds of a durable economic recovery.
Retail sales increased 1.6 percent last month, more than anticipated and the biggest gain in four months, according to figures from the Commerce Department issued today in Washington. Another report showed consumer prices rose 0.1 percent.
Stocks climbed for a fifth day after the reports signaled the expansion is broadening without stoking inflation, and results at JPMorgan Chase & Co. and Intel Corp. beat estimates. Federal Reserve Chairman Ben S. Bernanke told lawmakers today the world’s largest economy still faces “significant restraints,” indicating policy makers will keep interest rates low in coming months.
“What we’re seeing now is the consumer take part in the recovery,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “The Fed’s not taking the punch bowl away quite yet,” because inflation is “very tame,” he said.
In testimony before the Joint Economic Committee of Congress, Bernanke said recent data indicated a “moderate economic recovery in coming quarters,” while weak construction and still-high unemployment remained impediments to faster growth.
The Standard & Poor’s 500 Index rose 0.6 percent to 1,205 at 11:47 a.m. in New York. The index has advanced in eight of the past nine trading sessions.
‘Real’ Improvement
The economy is showing “real and broad-based improvement,” Jamie Dimon, chief executive officer at JPMorgan, said today on a conference call with reporters. “This could be the makings of a good recovery.” The bank, the second-biggest in the U.S. by assets, said first-quarter earnings rose 55 percent on record fixed-income trading revenue and a reduction in provisions for credit losses.
Retail sales were projected to increase 1.2 percent, according to the median estimate of 79 economists in a Bloomberg survey. Forecasts ranged from gains of 0.5 percent to 2.1 percent. Purchases in February and January were revised to show 0.5 percent gains, up from the previously reported 0.3 percent and 0.1 percent respective increases.
The gain in consumer prices reported today by the Labor Department matched the median forecast of economists surveyed. Excluding food and energy, so-called core costs were unchanged in March, less than analysts anticipated. Compared with March 2009, the core index rose 1.1 percent, the smallest 12-month gain since 2004.
Lack of Inflation
“Inflation as a concern is relegated to the distant future,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “It gives the Fed the flexibility to keep rates low for a while.”
Retailers like Wal-Mart Stores Inc. and Home Depot Inc. are offering discounts to attract consumers coping with a 9.7 percent rate of unemployment and rising foreclosures. Target Corp. and Saks Inc. were among companies that benefited from an early Easter, better weather and a pickup in hiring, pointing to an expansion extending beyond manufacturing.
Retail sales excluding autos rose 0.6 percent, surpassing the 0.5 percent increase projected by the median estimate of economists surveyed.
Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales increased 0.5 percent after rising 1.2 percent in February.
Broad-Based Gains
Eleven of 13 major categories showed increases in sales last month, led by a 6.7 percent advance at auto dealers. Purchases of building materials jumped 3.1 percent, the most since November 2007, and receipts at clothing stores increased by the most in a year.
Dealerships saw a rebound last month after the February storms that pushed seasonal snowfall totals to records in parts of the eastern U.S. made some auto lots inaccessible.
Chain stores last month turned in their best year-over-year performance since 1999, industry figures showed last week. Gap Inc., Saks and TJX Cos. posted March sales gains that exceeded analysts’ estimates as warm weather and improving job prospects encouraged shoppers.
The Easter holiday in early April may have resulted in more March sales, according to economists such as Julia Coronado at BNP Paribas in New York.
Separate figures from the Commerce Department showed a 0.5 percent gain in inventories in February, the most since July 2008, as companies boosted orders to keep pace with sales.
Companies are poised to step up purchases and output in coming months after the recession prompted a record drawdown in stockpiles last year.
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