Posted on 05/12/2005 2:03:13 PM PDT by Pikamax
Strong retail sales calm soft-spot fears Thursday May 12, 4:45 pm ET By Alister Bull
WASHINGTON (Reuters) - U.S. retail sales surged to the strongest showing in seven months in April, government data showed on Thursday, as broad-based spending eased worries about a slowing U.S. economy and lifted forecasts for future growth. ADVERTISEMENT
A larger-than-expected rise in jobless claims put a slight cloud on the horizon. But markets focused on heavy spending by consumers as the second quarter began and drove the dollar to its highest level this year against major currencies.
The Commerce Department said retail sales jumped 1.4 percent, double Wall Street's forecasts, on broad-based gains after March's increase was revised up slightly to 0.4 percent.
A Labor Department report showed first-time claims for jobless insurance rose to 340,000 in the week ending May 7, versus forecasts of 325,000.
The April sales number should add weight to contentions by Federal Reserve officials that a recent oil-induced slowdown in economic growth is likely to prove temporary.
Economists cautioned the early Easter break might be responsible for seasonal distortions that made April stronger and March weaker than expected.
EASTER IMPACT
But averaging the two months together still produced a solid 0.9 percent increase, which will encourage the U.S. central bank to keep raising interest rates at a measured pace.
"Bottom line: The economy is fine, and the Fed will continue to take the funds rate toward neutrality," said RBS Greenwich Capital chief economist Stephen Stanley.
U.S. government bond prices initially dipped on the retail sales report but rebounded in afternoon New York trade with the 10-year benchmark ending 9/32 higher on a yield of 4.17 percent.
U.S. economic growth slowed to an annual 3.1 percent pace in the first quarter amid soaring energy costs. But economists now think that number may be revised up after stronger than expected trade numbers in March.
"We now see second-quarter GDP (gross domestic product) growth running at plus 4.0 percent and we expect first-quarter GDP to be revised up to plus 3.7 percent ... that sure wasn't much of a soft patch," Morgan Stanley economists David Greenlaw and Ted Wieseman wrote in a note to clients.
The Commerce Department also lifted retail sales numbers for previous months.
As well as raising March sales, it revised February's number to an advance of 0.7 percent from 0.5 percent.
Excluding autos, which can swing sharply from month to month, the Commerce Department said retail sales climbed 1.1 percent, versus 0.2 percent in March. Wall Street had expected a 0.6 percent rise in April. Taking the average of March and April, ex-auto sales were up 0.7 percent.
STRONG SECOND QUARTER
The numbers will likely be seen as a sign consumer spending, which drives two-thirds of U.S. output, was faring well at the start of the second quarter.
"You could well have the first quarter being revised up after yesterday's trade numbers, and it looks like the second quarter is off to a good start in terms of consumer spending," said Rick Egelton, chief economist at the BMO Financial Group.
A government report on Wednesday showed the U.S. trade deficit narrowed unexpectedly in March to $55 billion, the largest drop in more than three years as exports rose to a record and imports from China declined.
After the trade numbers, many on Wall Street raised their first-quarter GDP estimates.
News on U.S. growth began to brighten convincingly last week when an April employment report showed a much stronger-than-expected 274,000 jobs created last month. The latest reading for the workplace was not so encouraging, but the underlying trend looked solid.
Initial claims for jobless benefits rose for the third straight week from an upwardly revised 336,000 the previous week and to its highest level since April 2, the Labor Department said.
Economists had expected claims to fall to 325,000 from the originally reported 333,000 in the week ended April 30.
The closely watched four-week moving average, which irons out weekly fluctuations to provide a clearer picture of job-market trends, rose 2,000 to 324,000.
"The four-week average in jobless claims remains below the trend through 2004 ... consistent with the trend in payroll gains remaining at least as strong as last year's 183,000 per month average," UBS economists wrote. (Additional reporting by Nancy Waitz in Washington) ((Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com)
I was wondering why I haven't been hearing about the "disastrous" Bush economy from Pelosi and Hillary.
They had an "economic expert" on that said,
"people are just buying things on credit,people want nice things so they're using credit cards,we'll pay for this down the road".
The old media never quits trying,but they are in their death-throes.
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