By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales unexpectedly stalled in April as the boost from stimulus checks faded, but an acceleration is likely in the coming months amid record savings and a reopening economy.

The Commerce Department said on Friday the unchanged reading in retail sales last month followed a 10.7% surge in March, an upward revision from the previously reported 9.7% increase.

Economists polled by Reuters had forecast retail sales would rise 1.0%. Retail sales surged 51.2% on a year-on-year basis.

Last month’s unchanged reading in sales came as a 2.9% rise in motor vehicles purchases was offset by declines in spending elsewhere. Sales at clothing stores tumbled 5.1%. There were also decreases in sales at sporting goods, hobby, musical instrument and book stores. Sales at building material stores slipped 0.4%. Online retail sales fell 0.6%.

But consumers increased spending at restaurants and bars, leading to a 3.0% rise in receipts. That followed a 13.5% jump in March. Sales at restaurants and bars are 116.8% higher compared to April 2020.

Economists expect demand to swing back to services from goods as vaccinated Americans venture out to places like restaurants and bars after being cooped up at home for more than a year. Receipts at electronics and appliance stores rose 1.2%. Sales at furniture stores dropped 0.7%.

Many qualified households received additional $1,400 checks in March, which were part of the White House’s $1.9 trillion COVID-19 pandemic rescue package approved early that month.

Retail sales account for the goods component of consumer spending, with services such as healthcare, education, travel and hotel accommodation making up the other portion. Households have accumulated at least $2.3 trillion in excess savings during the pandemic, which should underpin spending this year.

U.S. stocks were set to open higher. The dollar was trading lower against a basket of currencies. U.S. Treasury prices rose.

Coming on the heels of news this month that hiring slowed in April amid a shortage of workers, the weak sales could cause anxiety about the economic recovery. Though more than a third of Americans have been fully vaccinated against COVID-19, fears about the virus linger and schools have not fully reopened for in-person learning, keeping many workers at home.

Excluding automobiles, gasoline, building materials and food services, retail sales dropped 1.5% last month after an upwardly revised 7.6% increase in March. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously estimated to have shot up 6.9% in March.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, expanded at a 10.7% annualized rate in the first quarter, adding 7.02 percentage points to the economy’s 6.4% annualized growth pace.

Much of the surge in consumer spending last quarter occurred in March, which set a higher growth base for consumption heading into the second quarter.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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