US retail sales increased further in April, but some of the rise in receipts was likely due to higher inflation as the war with Iran boosted prices of energy products and other commodities.
Retail sales rose 0.5 percent last month after a downwardly revised 1.6 percent jump in March, the Commerce Department's Census Bureau said on Thursday. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, gaining 0.5 percent after a previously reported 1.7 percent increase in March.
The US-Israeli conflict with Iran is driving up inflation. The government reported this week that consumer prices increased strongly for a second straight month in April, with the annual rate posting its largest gain in three years.
Gasoline prices rose 12.3 percent in April, data from the US Energy Information Administration showed.
Soaring gasoline prices have yet to pull spending away from other areas, thanks to larger tax refunds this year. The average tax refund was up US$323(HK$2,519.4) through April 25 compared to the same period in 2025, Internal Revenue Service data showed.
But that cushion is diminishing.
Economists at PNC Financial said an analysis of internal data showed "consumers are drawing down tax refunds more rapidly than last year, particularly among lower-income households," adding they were seeing "less of those refunds being used towards paying down credit card and other debt."
Lower-income consumers disproportionately spend more on gasoline relative to higher-income households. With consumer sentiment plumbing record lows in early May and inflation outpacing wage growth for the first time in three years, there are concerns that spending could slow considerably this year.
Retail sales excluding automobiles, gasoline, building materials and food services rose 0.5 percent in April after an upwardly revised 0.8 percent increase in March. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product, and were previously reported to have advanced 0.7 percent in March.
Consumer spending, which accounts for more than two-thirds of the economy, increased at a 1.6 percent annualized rate in the first quarter, decelerating from the October-December quarter's 1.9 percent growth pace. It has cooled from the 3.5 percent growth rate notched in the third quarter of 2025.
Reuters
