U.S. Retail Sales Rise 1.6%, Unemployment Claims Drop To Lowest In 50 Years

Slumping U.S. retail sales posted a welcome rebound in March, climbing 1.6 percent, which is the biggest increase since September 2017, while unemployment claims dropped to its lowest level in 50 years.

Economists polled by Reuters forecast retail sales improving by only 0.9 percent in March. Retail sales stumbled 0.2 percent in February, according to data from the U.S. Department of Commerce

Consumer spending accounts for more than two-thirds of U.S. economic activity. It’s currently being boosted by a tightening labor market that’s driving-up salaries and wages.

The sales spike in March means retail sales have now erased the plunge in December 2018, normally a strong sales month, which sent consumer spending and the broader economy on a much lower growth path.

“The rebound in retail sales underscores that the domestic outlook remains favorable and well-supported by the labor market, and it dispels the misguided concerns that the U.S. economy is slipping into recession,” said Kathy Bostjancic, head of U.S. macro investor services at Oxford Economics in New York.

Analysts said retail sales last March probably benefited from the tax refunds despite refunds being smaller than in previous years because of a rewriting of the U.S. tax code in January 2018.

Core retail sales rebounded 1.0 percent in March after falling 0.3 percent in February. Core retail sales exclude automobiles, gasoline, building materials and food services, and correspond most closely with the consumer spending component of gross domestic product or GDP

Economists said the uptick in March is the latest indication U.S. economic growth has improved in the first quarter after a false start. They noted the economy’s steady strength is being confirmed by other data released Thursday.

The number of Americans filing applications for unemployment benefits dropped to the lowest in nearly 50 years last week, said the U.S. Department of Labor. Initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 192,000 for the week ended April 13, the lowest level since September 1969.

Claims have now fallen for five straight weeks. In contrast, economists had forecast claims rising to 205,000 in the latest week.

Job gains remain above the 100,000 needed per month to keep up with growth in the working-age population. The trend in hiring has slowed, however.

Economists said stronger growth in the first quarter won’t change the view that the economy will slow this year as the stimulus from a $1.5 trillion tax cut package fades.