Strong US retail sales boost first-quarter growth estimates

U.S. retail sales increased more than expected in March amid a surge in receipts at online retailers, further evidence that the economy ended the first quarter on solid ground.

The report from the Commerce Department on Monday, which followed news this month of robust employment gains in March and a pick-up in consumer inflation, bolstered expectations that the Federal Reserve could delay cutting interest rates until September. Some economists see the window for lowering rates this year closing.

Strong retail sales prompted economists at Goldman Sachs to boost their gross domestic product (GDP) growth estimate for the first quarter to a 3.1% annualized rate from a 2.5% pace. The economy grew at a 3.4% rate in the fourth quarter.

“The stronger economic activity remains, the slower inflation declines and the later the Fed responds with rate cuts,” said Kathy Bostjancic, chief economist at Nationwide. “The lack of moderation in consumer spending and inflation … could push off rate reductions to next year.”

 

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