Retail sales beat expectations; building sector a boom to economy

Booming sales at home improvement and gardening stores lifted the retail industry in April, according to government data released Friday, the latest sign that consumers are coming out of their long hibernation.

Building-sector sales jumped 6.9 percent in April from the previous month, while other categories had only tepid gains or even slight declines. That pushed total retail sales up 0.4 percent in April, better than some economists had expected.

The thaw in consumer spending is a key component of any economic turnaround. After suffering shellshock for much of 2009, shoppers this year have begun replacing worn-out merchandise and splurging on discretionary purchases. April marks the seventh consecutive month of gains in retail sales.

"It's quite clear that consumers at least are not wondering whether the economy is still in recession and spending as if they are in recovery mode," said Craig Thomas, senior economist at PNC Financial Services.

In May, consumers also reported feeling slightly more optimistic, sending the University of Michigan/Reuters consumer sentiment index up to 73.3, from 72.2. That rise was mainly because of consumers' improved outlook for the future, though economists warned that tends to be volatile.

Still, shoppers have proved willing to loosen their purse strings as the economy stabilizes. The jump in building sales in April follows better-than-expected quarterly earnings from home improvement giants Home Depot and Lowe's. The chains reported that the bounce seemed to come from individual shoppers sprucing up their homes, rather than from their commercial contracting businesses. The National Association of Realtors released data this week that showed existing home sales up 11.4 percent during the first quarter from a year ago.

"The slow road to recovery is turning into a sprint as retailers experienced a nice bounce in April," said Matt Shay, chief executive of the National Retail Federation, a trade group. "But maintaining this sales momentum will be challenging."

The high unemployment rate continues to curtail consumer spending, and many economists think a true rebound in sales will hinge on improvement in the job market. In the meantime, shoppers are tapping into the savings they had built up during the throes of the recession to help pay for their new purchases.

Auto sales showed a 0.5 percent uptick in April, signaling that consumers are still willing to make big-ticket purchases. Sales at health and personal care stores increased 0.9 percent, and restaurant sales inched up 0.1 percent.

But other discretionary categories were not as strong. Clothing store sales dropped 1 percent in April after gaining a month ago. Sales at department stores fell 1.5 percent, while electronics stores dipped 0.4 percent.

"Some of the things that we're seeing are blips that will change from month to month," said John Long, retail strategist with consulting firm Kurt Salmon Associations. "We have to continually reset our expectations."