INSTANT VIEW: March retail sales rise more than expected

NEW YORK (BestGrowthStock) – Sales at U.S. retailers rose more strongly than expected in March as consumer stepped up purchases of vehicles and wide range of goods, government data showed on Wednesday, suggesting a broadening of the manufacturing-led economic recovery.

U.S. consumer prices rose 0.1 percent in March, a government report showed on Wednesday, matching economists’ expectations for a tame reading and giving the Federal Reserve leeway to maintain ultra-low interest rates.

KEY POINTS:

RETAIL SALES: *The Commerce Department said total retail sales jumped 1.6 percent, the largest increase since November, from an upwardly revised 0.5 percent rise in February. * Analysts polled by Reuters had forecast retail sales increasing 1.2 percent last month. * Compared to February last year, sales rose 7.6 percent. * Motor vehicle and parts purchases surged 6.7 percent last month, the biggest rise since October, after dropping 1.9 percent in February. * Excluding motor vehicles and parts, retail sales rose 0.6 percent in March after rising 1.0 percent the prior month as a combination of an early Easter holiday and warm weather boosted receipts at clothing stores. * Economists had expected a 0.5 percent gain. * Core retail sales, which exclude autos, gasoline and building materials, rose 0.5 percent after increasing 1.2 percent in February.

CPI: * The Labor Department said the rising cost of fresh fruits and vegetables was the primary cause of the increase in the seasonally adjusted index. * The index for food at home rose 0.5 percent, the largest gain since September 2008. * Excluding volatile food and energy prices, core CPI was unchanged in March after rising 0.1 percent in February. * Economists polled by Reuters had expected a 0.1 percent rise in core CPI. * Over the last 12 months, CPI has increased 2.3 percent, before seasonal adjustment. * Excluding food and energy, the core has risen just 1.1 percent over that period, the smallest increase since January 2004.

COMMENTS:

PETER BOOCKVAR, EQUITY STRATEGIST, MILLER TABAK + CO, NEW

YORK:

“Sales were strong in motor vehicles, parts, building materials and clothing and also rose in all other categories except electronics. We saw very solid comps last Thursday so today’s figure is not a surprise but is seasonally adjusted so (it) smooths out somewhat the Easter holiday influence which impacted last week’s sales reports. Bottom line, the consumer has come back strong, likely due to pent up demand after a tough retrenchment, and now we need job growth and income growth to sustain the strength because access to credit will still remain muted relative to the last boom cycle.”

FRED DICKSON, CHIEF MARKET STRATEGIST, D.A. DAVIDSON & CO.,

LAKE OSWEGO, OREGON:

“Data were maybe a little bit stronger, and it confirms what we’re seeing — people are going out and spending a little bit of money. I’m not surprised after retail comp sales last week. A lot of chains reported double-digit comps, so it indicated consumers at this point don’t appear to be shying away.”

BULENT BAYGUN, SENIOR BOND MARKET STRATEGIST, BNP PARIBAS, NEW

YORK, NEW YORK:

“It’s (retail sales) stronger than expected, pretty much across the board. Yet inflation has come in lower than expected. The Fed will probably be able to stand on the sidelines longer.

“The front end of the curve is rallying, and the curve has steepened somewhat. That’s exactly what I expect to continue to happen.”

MICHAEL MALPEDE, SENIOR STRATEGIST, EASY FOREX, CHICAGO:

“The retail sales numbers came out better than expected. The dollar has firmed a bit against the yen and we’ve seen a little bit of extension of the weakness against the commodity currencies. It’s helping to support risk appetite.

“Probably the importance of the data is how it affects the outlook as to whether or not the Fed is going to consider changing its extended period language. And the traders are going to be watching comments from (Ben) Bernanke before the economic committee today fairly closely.

“The counterbalance is the CPI numbers came out as expected and the core inflation is flat. As long as inflationary pressures are subdued, it gives the Fed leeway to maintain low yields for quite a long time.”

JOHN CANAVAN, ANALYST, STONE & McCARTHY RESEARCH ASSOCIATES,

NEW YORK:

“The CPI seemed to have a greater impact on Treasuries than the retail sales figure. Treasuries erased losses even though retail sales were higher than expected.

“Retail sales were stronger than expected. CPI was especially tame, however. And Treasuries, which were lower throughout the night, moved back to roughly unchanged levels and now await Bernanke’s testimony.”

SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR &

ASSOCIATES, TORONTO:

“CPI remains in check so I think that gives the Fed more room in terms of when to decide to change policy or raise interest rates. Both the stock and the bond markets should find the data fairly positive.

“The consensus has been the consumer has not yet come back. I guess (the retail data) should neutralize some of those worries. The question that will remain is how sustainable is the consumer recovery going to be.”

BERNARD BAUMOHL, CHIEF GLOBAL ECONOMIST, THE ECONOMIC OUTLOOK

GROUP LLC, PRINCETON, NEW JERSEY:

RETAIL SALES: “This should be capturing the attention of financial markets. The consumers are back. We are seeing a surprise rise in consumer spending.

“We may have to reassess the state of the American household wealth. A lot of Americans may have successfully deleveraged. There has been evidence people have shed their debt burden by unconventional means such as walking away from their mortgages and filing for bankruptcy.

“There is also enormous pent-up demand with the consumers, who had held off buying items during the recession. Now they are going back to buy new cars to replace new ones.”

CPI: “There’s no inflation in the economy because we have still a lot of slack in the work force and wages are not going up materially. Retailers cannot pass on higher costs to consumers. Consumer should continue to see prices stabilize and that could spur more spending.

“As for Federal Reserve policy, it further increases the chance that there will be no changes in monetary policy this year. It may occur at the end of the year at the earliest but mostly likely it won’t happen until 2011.

“The bond market should react positively because inflation is very much under control. Investors have been concerned that inflation will pick up and we haven’t seen that so far since growth has returned.”

MARKET REACTION: STOCKS: U.S. stock index futures add to gains after retail sales data. BONDS: U.S. Treasury debt prices pare early price losses. DOLLAR: U.S. dollar extends gains versus yen.

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INSTANT VIEW: March retail sales rise more than expected