In the first four months of the year, consumer spending far outpaced the rate of inflation: The US consumer price index moved up by 2.3% during the period, compared to a 4% jump in total retail sales.
In April, retail sales jumped by 0.9% from the previous month, according to data from the Commerce Department. The agency also revised numbers for March, when sales jumped by 1.4% on the month vs. the 0.5% originally reported.
The April data show Americans further reclaiming their pre-pandemic life. Consumers backed away slightly from spending on food and beverages in stores, but picked up their spending on restaurants and bars by 2%. Americans also spent more on department stores, electronics, clothes, and furniture.
In April, gas prices retreated from their initial spike after Russia’s invasion of Ukraine, while vehicle sales picked back up by 2.2% after a decrease in March. Americans found better prices through ecommerce as online spending moved up by 2.1%. Spending on building supplies declined as home builders began to catch up on inventories for the first time in a while.
The positive spending data should ease economists’ fears of a recession. Excluding the volatile car prices, economists had expected a 0.4% and saw a 0.6% instead. However, if they continue, Americans’ spending habits also suggest that high inflation is going to persist.
At some point higher interest rates and commodity prices should cut into Americans’ discretionary spending. But that time is yet to arrive.