U.S. retail sales were flat in April as households cut back on purchases of automobiles and other big-ticket items, indicating the economy was struggling to rebound strongly after barely growing in the first quarter.
The weak retail sales report from the Commerce Department, and other data on Wednesday showing the 10th straight month of declining import prices in April, suggest little urgency for the Federal Reserve to start raising interest rates.
"In terms of the Fed, the sluggish spending and economic growth performance will continue to argue for a later start to liftoff, essentially ruling out a mid-year hike," said Millan Mulraine, deputy chief economist at TD Securities in New York.
While March's retail sales were revised up to show a 1.1% increase instead of the previously reported 0.9% rise, that was not enough to offset the general weak tone of the report. Economists had forecast sales rising 0.2% in April.
Futures markets continued to show that traders do not expect an interest rate hike until December at the earliest. The dollar fell to session lows against the euro and Swiss franc, and approached a near one-week low versus the yen.
Prices for U.S. Treasury debt rose.
Retail sales excluding automobiles, gasoline, building materials and food services were also unchanged after an upwardly revised 0.5% increase in March.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Economists had forecast core retail sales rising 0.5% in April after a previously reported 0.4% increase in March.
Retail sales have trended weaker despite households getting a massive windfall from lower gasoline prices. Consumers appear to have saved much of the money from the cheaper gasoline.
The sales data added to employment and manufacturing reports in suggesting that while the economy was finding its footing at the start of the second quarter, it lacked enough vigor to convince the Fed to tighten monetary policy before the end of the year.
The economy was walloped earlier in the year by a mix of bad weather, disruptions at ports, a strong dollar and deep spending cuts by energy firms. The government reported last month that GDP expanded at a 0.2% annual pace in the first three months of the year.
Trade and wholesale inventory data published last week, however, suggested the economy actually contracted. The government will release its GDP revision later this month.
The case for the central bank to delay raising interest rates was strengthened by a separate report from the Labor Department showing import prices fell 0.3% in April after slipping 0.2% in March.
The dollar, which has gained about 11% against the currencies of the United States' main trading partners since June, and lower crude oil prices are keeping a lid on price pressures. That has left inflation running well below the Fed's 2% target.
Last month, retail sales were curbed by a 0.4% drop in receipts at auto dealerships. Receipts at service stations fell 0.7%. Sales at electronic and appliance stores slipped 0.4%, while receipts at furniture stores declined 0.9%.
There were some pockets of strength, with receipts at clothing stores up 0.2%, likely as consumers took advantage of Easter holiday discounts.
Receipts at online stores increased 0.8%, as did sales at sporting goods stores. Sales of building materials and garden equipment rose 0.3%. Sales at restaurants and bars increased 0.7%.