Retail sales and industrial production in the US climbed more than forecast in April, indicating the economic recovery gained momentum at the start of the second quarter.
Sales increased 0.4 per cent last month after a 2.1 per cent gain in March that was larger than previously estimated, Commerce Department figures showed today in Washington. Production rose 0.8 per cent, the most in three months, the Federal Reserve said.
Another report showed consumer sentiment improved in May following four straight months of payroll gains, suggesting Americans will keep shopping at retailers including Home Depot Inc and JC Penney Co Factories are cranking up assembly lines and hiring to meet rising demand at home and abroad, helping to sustain the expansion of the world’s largest economy.
“We’re seeing a broadening of the recovery,” said Brian Bethune, chief US financial economist at IHS Global Insight in Lexington, Massachusetts, who correctly forecast the gain in industrial production. “Consumers are still engaged. There is some pent-up demand out there.”
Stocks fell and Treasury securities rose as concern about the impact of Europe’s debt crisis overshadowed signs of improvement in the US economy. The Standard & Poor’s 500 Index lost 2.2 per cent to 1,131.77 at 11:50 am in New York.
The 10-year Treasury note rose, pushing down the yield 10 basis points to 3.43 per cent. Retail sales, which have increased seven straight months, were forecast to rise 0.2 per cent, according to the median estimate of 83 economists in a Bloomberg News survey.
Not as broad-based
The April gain wasn’t as broad-based as in prior months, which may reflect the influence of an early Easter. More holiday-related shopping probably took place in March at the expense of April. After revisions, the March rise in purchases matched the increase last August as the biggest since January 2006.
Six of 13 major categories showed gains in sales last month. Sales at building-material stores such as Home Depot rose 6.9 per cent in April after a 7.8 per cent gain, the best two-month performance on record going back to 1992.
Purchases of automobiles rose 0.5 per cent, counter to industry figures which showed a drop. Spending at service stations, health-care stores and restaurants also climbed.
Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales decreased 0.2 per cent, the first drop since July.
Labour market
One reason for the spending gains may be that the labour-market recovery is accelerating. Payrolls increased by 290,000 in April, the most in four years, according to figures from the Labor Department last week.
Americans were less pessimistic about the labor market, helping lift consumer sentiment in early May, according to a Thomson Reuters/University of Michigan report. The index of confidence rose to 73.3 from an April reading of 72.2.
The Fed’s report today showed output at factories, mines and utilities climbed last month after a 0.2 per cent gain in March. Production at manufacturers rose 1 per cent for a second month.
“The manufacturing sector continues to sort of lead the way in the recovery,” said Julia Coronado, a senior economist at BNP Paribas in New York. Factories are “benefitting from the upswing in the inventory cycle, recovering global trade and the upswing in consumer spending,” she said.
Economists forecast industrial production would increase 0.7 per cent in April, according to the median of 81 projections in a Bloomberg survey. The April gain was the biggest since a 1.2 per cent jump in January.
Capacity Utilisation
The Fed’s report showed capacity utilisation, which measures the amount of a plant that is in use, rose to 73.7 per cent last month, the highest since November 2008, from 73.1 per cent in March. The gauge averaged 80 over the past 20 years and suggests inflation remains low.
Utility output decreased 1.3 per cent in April, while mining production, which includes oil drilling, rose 1.4 per cent.
Production of business equipment increased 1 per cent after a 1.1 per cent gain in March. Output of computers, electrical equipment and appliances increased last month.
Consumer goods production rose 0.2 per cent in April. Motor vehicle and parts production declined 2.2 per cent last month after a 1.9 per cent rise.
Manufacturers, which make up about 12 percent of the economy, are benefiting from gains in business spending and expanding global economies.
Cisco sales
Cisco Systems Inc, the world’s biggest provider of networking equipment, this week forecast a 25 per cent to 28 per cent increase in fourth-quarter revenue. Sales in the fiscal third quarter, which ended May 1, rose 27 per cent.
The recovery is “accelerating,” Chief Executive Officer John Chambers said on a May 12 conference call. “I’d say now almost without exception, most people are beginning to slowly turn cautiously optimistic.”
Caterpillar Inc, the world’s biggest construction equipment maker, expects sales to increase this year as exports rebound, Chief Executive Officer Jim Owens said May 5. The company said last month it has added about 1,500 jobs since year-end because of higher production volume, including 600 in the U.S.
“We’re seeing a very sharp recovery in 2010,” Owens said in an interview in Washington. “Exports by the end of the year will be close to record levels.”
