U.S. retail sales surged again last month, data indicated Monday. suggesting that domestic consumers are extending their spending spree into the spring, adding further pressure to bets on a near-term rate cut from the Federal Reserve.
Headline retail sales rose 0.7% from February to a collective total of $709.6 billion, the Commerce Department said, coming in well ahead of economists' consensus forecast of a 0.4% gain. The February total was revised higher as well, to a gain of 0.9% from the original estimate of 0.6%
The closely-tracked control group number rose 1.1% on the month, more than triple Wall Street forecasts. This figure, which excludes autos, building materials, office supplies, gas-station sales and tobacco, feeds into the government's GDP calculations.
Gasoline-station sales were down 3%, the release indicated, after Energy Department data showed the national average rose 6.4% from February to $3.542 per gallon.
“While people are edgy about inflation, the bigger story could be strong growth for the economy," said David Russell, global head of market strategy at TradeStation. "Today’s retail number confirms this might be happening. Rate cuts are dropping like flies, but the positive impact on earnings could offset some of that pain.
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U.S. stocks extended gains following the data release, with the S&P 500 rising 38 points, or 0.78%, while the Dow gained 390 points higher. The Nasdaq, meanwhile, is up 87 points, or 0.54%.
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Benchmark 10-year Treasury note yields rose 4 basis points to 4.614% following the data release, while two-year notes rose 2 basis points to 4.972%.
The CME Group's FedWatch indicates the Fed will hold its benchmark rate steady at between 5.25% and 5.5% next month in Washington, with the odds of a June rate cut now pegged at just 24.3%. Markets now don't expect the Fed to cut rates until at least September.
Last week, the Commerce Department said headline inflation quickened to 3.5% in March, rising from the prior month's tally of 3.2% and coming in ahead of Wall Street's 3.4% consensus forecast.
So-called core inflation, which strips out volatile components like food and energy, held at 3.8%, the lowest in more two years but higher than Wall Street's 3.7% forecast. The monthly reading of 0.4% also topped Wall Street forecasts and matched the February reading.
The Fed tracks core inflation pressures as part of its price-stability mandate, and the year-on-year gains remain nearly double its preferred target of 2%.
The Labor Department's March jobs report was also impressive, showing a better-than-expected hiring tally of 303,000, with average hourly earnings rising 0.3% and matching the smallest increase since last autumn.
Meanwhile, the labor-force-participation rate edged higher, to 62.7%, while the headline unemployment rate slipped to 3.8%, just inside Wall Street forecasts.
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