Flat retail sales mean weak start to US second quarter

US retail sales were flat in April, starting the second quarter of the year on a weak footing and confounding analyst expectations for a spring bounce.

Sales were little changed at $436.8bn in the month, following an upwardly revised 1.1 per cent rise in March, according to the figures from the Commerce Department.

Economists had predicted a headline gain of 0.2 per cent, according to a Bloomberg survey. Stripping out vehicles, sales were up 0.1 per cent, while sales leaving out autos, petrol and building materials were flat, also shy of analyst expectations.

The soggy numbers doused hopes that the freezing start to the year would give way to more robust spending data once better weather arrived.

US, European and UK government bond yields edged lower after the retail numbers missed forecasts, while the euro gained ground against the dollar, rising 0.8 per cent to just above the $1.13 mark.

The Federal Reserve acknowledged a first quarter slowdown in its policy statement last month as it left rates at near-zero levels. Some of the forces weighing on the numbers - including bad weather and a port strike - were likely to be transient, it said, however.

The central bank has been expecting robust consumer spending data in part thanks to the sharp decline in oil prices, which has delivered savings of $700 per household since June.

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The weak April reading for retail sales was driven in part by a 0.4 per cent fall in motor vehicle and parts sales, as well as a 0.7 per cent fall in sales at petrol stations. There was also a sharp fall in sales from furniture stores, which dropped 0.9 per cent, while restaurant sales increased 0.7 per cent on the month.

"We still aren't really seeing the big recovery that was anticipated in the wake of the weather depressed first quarter. This just really reinforces the view that a June hike isn't happening and that September looks the more probable start point" said James Knightley, an economist at ING Bank.

Separate figures suggested the dollar is weighing on prices, which could hold back gains in inflation. Import prices dropped a seasonally adjusted 0.3 per cent in April, according to the Labor Department.

Gus Faucher, an economist at PNC, argued conditions were still supportive for consumers. "Job growth rebounded in April, and wage gains should accelerate as the labour market continues to tighten. The big drop in gasoline prices should support spending in other areas; sales at restaurants have been strong lately, probably for this reason," he said.

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