Retail sales growth slowed in April from March as higher gas cost leaves less room for nonessentials

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NEW YORK (AP) — Shoppers pulled back on spending in April as higher gas prices fueled by the Iran war meant less money left over for some nonessentials like clothing and furniture.

But economists noted that consumer spending, propped up by generous income tax refunds, is still healthy. Still, they worry that spending will fall off as benefits from the refunds dissipate, and shoppers continue to deal with the cumulative impact of rising gas prices at the pump.

Retail sales rose 0.5% in April, a slowdown from the revised growth level of 1.6% in March, according to Commerce Department data released Thursday. March marked the largest one-month increase in retail spending in more than three years, largely because gas prices spiked higher rapidly.

Excluding gas sales, retail sales in April were up 0.3%. That's a slowdown from the 0.7% pace, excluding business from gas stations, in March. In April, sales at gas stations rose 2.8%, in comparison to a 20.9% hike in March, due to the spike in gas prices.

Elsewhere, shopping was uneven.

Sales at department stores fell 3.2%, while sales at furniture and home furnishings stores slipped 2%. Business at building material and garden equipment had a modest 0.1% increase. But online retailers saw a 1.1% increase, and electronics and appliance stores posted a 1.4% sales gain.

The snapshot offers only a partial look at consumer spending and doesn’t include things like travel and hotel stays. The lone services category – restaurants – registered a solid 0.6% increase.

The so-called control group—which excludes food services, autos, building materials and gas station sales and is used to calculate economic growth—rose 0.5%. That offered a good sign of solid spending by consumers, economists said.

The Iran war that began in late February has led to the shut down of the Strait of Hormuz, cutting off one-fifth of the world’s daily oil supply. The average price for a gallon of regular gasoline rose again overnight to $4.53 on Thursday. That’s $1.35 more than it cost a year ago, according to motor club AAA.

Economists had believed that larger tax refunds from President Donald Trump's tax cut legislation would kick start spending at the start of the year. But soaring gas prices are taking a bigger slice out of American paychecks since the start of the war, leaving less for things like dining out, new clothes or other treats.

Oliver Allen, senior economist at Pantheon Macroeconomics, estimated in a report published Thursday that individual income tax refunds in April were $22 billion higher than in the same month in 2025, equivalent to around 3% of monthly retail sales and slightly bigger than the hit to households from the jump in gas prices over the same period.

“Some of this money will have been saved, but much of it has been spent,” he wrote. “But the flow of refunds will taper dramatically in May, leaving consumers far more exposed to the surge in fuel costs. ”

Allen expects a “meaningful pullback” in discretionary spending in the second half of the second quarter.

Michael Pearce, chief U.S. economist at Oxford Economics, estimates that higher tax refunds have offset the impact of gas prices by a ratio of around 2 to 1.

“With refund season behind us and gas prices still creeping higher, that will flip in the months ahead, putting downward pressure on spending growth,” he wrote in a report published on Thursday.

Still, U.S. employers have so far defied the economic shock from the war and last month added a surprisingly strong 115,000 jobs.

But concerning data about rising prices has arrived in waves this week.

The Labor Department reported Wednesday that the U.S. producer price index — which tracks inflation before it hits consumers — shot up 1.4% in April, the biggest monthly gain in more than four years. A day before that, the closely watched consumer price index jumped 3.8% from April 2025 — the biggest year-over-year increase in more than three years. Those price hikes, again, largely do to soaring energy prices, have begun to show up in everything from plane tickets and baggage fees, to soap and toothpaste.

A clearer picture of how inflation is impacting Americans may arrive next week when major U.S. retailers like Walmart and Target begin to release quarterly financial results.