U.S. retail sales increased further in April, but some of the rise in receipts was likely due to higher inflation as the war with Iran boosted prices of energy products and other commodities.
Retail sales rose 0.5 per cent last month after a downwardly revised 1.6-per-cent jump in March, the Commerce Department’s Census Bureau said on Thursday.
Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, gaining 0.5 per cent after a previously reported 1.7-per-cent increase in March.
The U.S.-Israeli conflict with Iran is driving up inflation. The government reported this week that consumer prices increased strongly for a second straight month in April, with the annual rate posting its largest gain in three years.
Gasoline prices rose 12.3 per cent in April, data from the U.S. Energy Information Administration showed.
Soaring gasoline prices have yet to pull spending away from other areas, thanks to larger tax refunds this year. The average tax refund was up US$323 through April 25 compared to the same period in 2025, Internal Revenue Service data showed.
But that cushion is diminishing.
Economists at PNC Financial said an analysis of internal data showed “consumers are drawing down tax refunds more rapidly than last year, particularly among lower-income households,” adding they were seeing “less of those refunds being used towards paying down credit card and other debt.”
Lower-income consumers disproportionately spend more on gasoline relative to higher-income households. With consumer sentiment plumbing record lows in early May and inflation outpacing wage growth for the first time in three years, there are concerns that spending could slow considerably this year.
Retail sales excluding automobiles, gasoline, building materials and food services rose 0.5 per cent in April after an upwardly revised 0.8-per-cent increase in March. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product, and were previously reported to have advanced 0.7 per cent in March.
Consumer spending, which accounts for more than two-thirds of the economy, increased at a 1.6-per-cent annualized rate in the first quarter, decelerating from the October-December quarter’s 1.9-per-cent growth pace. It has cooled from the 3.5-per-cent growth rate notched in the third quarter of 2025.