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The Boston Globe

Business

Retail spending could be reason for optimism on economy

But housing still a drag on growth

Justin Sullivan/Getty Images

Pay isn’t keeping pace with inflation. That, along with higher gas prices, could restrain consumer spending later this year.

WASHINGTON - Americans bought more electronics, started home improvement projects, and updated their wardrobes last month, inspired by warmer weather and a healthier job market.

Retail sales rose 0.8 percent, the Commerce Department said, capping a strong quarter for retail spending.

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Businesses are responding by restocking shelves at a steady pace, a sign they expect the trend to carry over into the spring.

More retail spending could ease concerns about March hiring, which slowed to half the pace of the previous three months.

“Retail sales soared in March, with stores in just about every category recording sharp increases over February levels,’’ said Joel Naroff, chief economist at Naroff Economic Advisors. “And let’s not forget, the February spending was strong.’’

Americans are spending more despite higher gas prices and little wage growth.

Excluding cars, gas, and food, sales rose 8.2 percent in the first quarter, the most in two years. The gain pushed total retail sales to a record high of $411.1 billion, 24 percent higher than the recession low in March 2009.

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“This is a good report,’’ said Chris Christopher, an economist at IHS Global Insight. “Consumers are spending despite feeling the pump price pinch.’’

Other recent data suggest stronger growth in the January-March quarter.

Business stockpiles rose a seasonally adjusted 0.6 percent in February, the Commerce Department said in a separate report. Larger stockpiles require businesses to order more goods. That leads to more factory production, which boosts growth.

And overall sales - which includes wholesalers and manufacturers as well as retailers - grew 0.7 percent.

James Marple, an economist at TD Bank, forecasts the economy expanded at an annual pace of 2.7 percent in the January-March quarter. That’s a full point higher than he estimated a month ago.

Still, the housing market has struggled to gain momentum. The National Association of Home Builders/Wells Fargo said its builder sentiment index fell for the first time in seven months. Builders also expressed weaker confidence in sales over the next six months.

Job gains averaged 246,000 per month from December through February. Hiring slowed to half that pace in March. More hiring has helped lower the unemployment rate from 9.1 percent in August to 8.2 percent in March.

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