U.S. retail sales unexpectedly declined in April for the second time in three months, weighed down by soft sales of autos and building materials and suggesting consumer spending will remain subdued this quarter.

The value of overall sales declined 0.2 per cent after a 1.7 per cent increase the prior month that was the strongest gain since 2017, according to Commerce Department figures released Wednesday. That compared with the median forecast in Bloomberg’s survey calling for a 0.2 per cent rise.

Sales in the “control group” subset, which some analysts view as a cleaner gauge of underlying consumer demand, were unchanged from the prior month, below projections for a 0.3 per cent gain. The measure excludes food services, car dealers, building-materials stores and gasoline stations.

The figures, also reflecting weakness in the category that includes online sales, suggest spending remains soft following the weakest quarterly increase in a year. That could bolster pressure from President Donald Trump and financial markets to cut borrowing costs amid unexpectedly low inflation, though Federal Reserve policy makers have pledged patience as steady job and income gains should support purchases in coming months.

The retail data are “a bit of a downer for the near-term economic outlook but do not move the big picture needle much,” Stephen Stanley, chief economist at Amherst Pierpont Securities, said in a note. Recent seesaw patterns suggest there could be a “powerful bounceback in May.”

Treasuries extended their rally after the data, with the 2-year yield touching a 15-month low of 2.14 per cent. Traders in the fed funds futures market boosted the odds of a central bank rate cut this year and are now pricing in around two quarter-point reductions by the end of 2020.

Tariff Threat

Retailers may be poised to take a further hit should Trump follow through on his threat to impose tariffs of 25 per cent on almost all remaining Chinese imports, which would likely force Americans to absorb higher prices. Unlike the previous targets of U.S. levies, the majority of this tranche is consumer goods.

The report showed seven of 13 major retail categories decreased, with other down sectors including clothing, health and personal care, and electronics and appliances. Categories with increases included general merchandise, food and beverage stores, and restaurants and bars.

Sales at automobile dealers fell 1.1 per cent, the most since January, after increasing 3.2 per cent in the previous month. Industry data from Wards Automotive Group previously showed unit sales retreated in April, touching the lowest level since 2017.

Filling-station receipts increased 1.8 per cent, the report showed, as oil prices rallied. The figures aren’t adjusted for price changes, so higher retail sales in the category could reflect higher gasoline costs, sales, or both.

Excluding automobiles and gasoline, retail sales fell 0.2 per cent following a 1.1 per cent increase.

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-Estimates in the Bloomberg survey for retail sales ranged from a 0.1 per cent decline to a 1.3 per cent gain.
-Nonstore retailers -- which includes electronic shopping and mail orders -- fell 0.2 per cent, the most since December.
-The retail-sales data capture just under half of all household purchases and tend to be volatile. April personal-spending figures, which detail consumer purchases, will offer a fuller picture of U.S. consumer spending at the end of the month.

--With assistance from Jordan Yadoo and Sophie Caronello.