Retail Sales in U.S. Rise; Rebound in Consumer Prices

Retail sales in the U.S. increased in April, while there was a rebound in consumer prices, pointing to an increase in economic growth and the gradual rise of inflation that might keep the U.S. Federal Reserve on its path to increase interest rates in June.

Reports released Friday added to date from the labor market in suggesting the stall in U.S. economic activity during the first three months of 2017 was an anomaly.

However, moderation in inflation year on year led the financial markets to lower expectations of at a minimum of two more increases in interest rates in 2017.

The U.S. Department of Commerce announced that retail sales had increased in April 0.4% after it revised figures for a gain of 0.1% for March. Sales increased by 4.5% during April on the basis of year on year.

Economists forecast retail sales to increase 0.6% in April. Excluding gasoline, automobiles, food services and building materials, retail sales were up by 0.2% after rising by 0.7% during March.

Those are the core retail sales that correspond the closest to the consumer spending component in the gross domestic product.

The growth in the economy during the first quarter was at 0.7% as an annualized rate. It was held in check by the weakest rise in consumer spending for the past seven years.

The Federal Reserve in Atlanta estimates that the GDP will increase at a 3.6% pace during the second quarter.

On Friday, in another separate report, the Department of Labor said the Consumer Price Index had increased 0.2% after falling 0.3% during March. The increase suggests that the decline in prices in March, which was the first in the past 13 months, was also an aberration.

For the 12 months through the end of April, the CPI was up 2.2%. While that was a drop from the increase of 2.4% for March, it nevertheless exceeded the average increase annually of 1.7% for the last decade.

The financial markets have priced more than 70% chance of a hike in interest rates at the June 13-14 Federal Reserve policy meeting.

However, the likelihood the central bank in the U.S. will increase their rates twice prior to the end of 2017 fell following the release of data on Friday.

The Fed increased its overnight benchmark interest rate in March by 25 basis points and forecast two additional hikes for 2017.