U.S. retail sales fell more than expected in March as consumers cut back on purchases of motor vehicles and other big-ticket items, suggesting that the economy was losing steam at the end of the first quarter because of higher interest rates, APA reports citing Reuters.
Ebbing demand for goods is undercutting production at factories, with other data on Friday showing manufacturing production declining last month.
Still, the economy is not slowing fast enough to stop the Federal Reserve from raising rates one more time in May, before an anticipated pause in June in the U.S. central bank's fastest monetary policy tightening cycle since the 1980s.
"American consumers are pulling back, but it's unclear how much of the fade is normal payback from an earlier binge and how much is underlying weakness," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "We suspect the headwinds are starting to dominate, and still look for a mild contraction in both spending and the economy through mid-year."
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