On Tuesday morning, the U.S Census Bureau will release the latest retail sales report, which chronicles the amount consumers spent on goods and services the previous month. Here are five things to watch for in April’s report: 

  1.  Retail Sales will improve from declines in February and March, but not by much. 

Following a January high, retail sales fell by a revised .5% in February and -.8% again in March, as pandemic-era savings dwindled, and economic headlines stoked uncertainty. Due to these declines, economists are expecting to see April’s retail sales, which are not adjusted for inflation, climb a modest 1%. 

“We had a very strong January, but other than that, in four out of the last five months, retail sales have been down,” said Tim Quinlan, senior economist at Wells Fargo. “[The] upshot of that is with even a modest amount of spending in April, we could actually get a little bit of a bounce in the report tomorrow.” 

  1. A strong labor market is driving retail sales. 

While economists are not expecting a large bounce in retail sales, a strong labor market is still supporting consumer spending. According to the Department of Labor, the U.S. economy added 253,000 jobs in April, and the unemployment rate fell to 3.4%, a historic low. Economists are expecting April’s strong jobs report to buoy retail sales, as consumers remain confident that they won’t be out of a job anytime soon and can afford to spend. The decline in February and March’s retail sales corresponds with February and March job reports, which were revised down in April’s report by a combined 149,000 jobs. 

  1. Economists are mixed on whether interest rate hikes from the Federal Reserve will affect consumer spending habits.

The Federal Reserve raised interest rates above 5% in May, the 10th consecutive monthly increase since March 2022 and a 16-year high. Some economists believe that these higher interest rates will not factor very much into consumer spending patterns. Other economists disagree with this perspective, arguing that high-interest rates are leading consumers to spend more on non-durable goods with lower price tags and shorter shelf lives, such as clothing and other consumables when compared to more expensive durable goods, such as appliances and automobiles, that may require consumers to borrow money. 

  1. Consumer spending will be concentrated on services. 

While consumers may be more likely to spend on non-durable goods than on durable goods, economists predict that the bulk of consumer spending is being spent in the service sector. Economists attribute this concentration in spending to the continued economic recovery following Covid. During the pandemic, with most services closed, consumers spent a lot of their money on goods, particularly durable goods, which stressed business inventory and supply chains. As consumers have emerged from the pandemic, they’ve proven eager to get back to spending on services, particularly on food services and hospitality, that they were denied as Covid raged. 

“One discretionary category where consumers are seeming to spend a little bit more is going out to eat,” Quinlan said. “So, we will look at the bars and restaurants category, the restaurants and drinking places in the parlance of the retail sales report, and see if we see any momentum there.” 

  1. The report won’t have an effect on the Fed’s decision to further raise interest rates. 

The Federal Reserve will meet again in June to determine whether or not to raise interest rates for the 11th consecutive month, to leave them where they currently stand, or to scale them back as inflation continues to respond. While the retail report can provide a snapshot of consumer sentiment and economic confidence, economists don’t expect the report to weigh heavily on the Fed’s decision as they seek to continue tackling inflation. 

“The Fed is only making its decision right now, based on the inflation report,” Schenker said. “The Fed has a dual mandate around jobs and inflation, and the retail sales report will not come into [their] calculus.” 

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