Economists polled by Reuters had expected retail sales, which account for about 30 percent of consumer spending, to drop 0.3 percent last month after a previously reported 0.4 percent decline in March.
So-called core sales, which strip out automobiles, gasoline and building materials and correspond most closely with the consumer spending component of gross domestic product, increased 0.5 percent after nudging up 0.1 percent in March.
The increase in core sales, coming on the heels of relatively strong job growth during the last three months, should help to ally fears of an abrupt slowdown in the economy early in the second quarter even as government austerity is starting to put a strain on manufacturing.
"Consumer spending looks to have started the second quarter off on a solid note," said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
U.S. stock index futures trimmed losses, while the dollar rose against the yen and the euro. Prices for U.S. Treasury debt fell.
Households are spending despite incomes being pinched by the end of a 2 percent payroll tax cut on Jan. 1. In addition, across-the-board government spending cuts kicked in March 1.
The economy grew at a modest 2.5 percent annual rate in the first quarter. The second-quarter growth pace is seen below 2 percent.
The tone of the retail sales report was mostly firm. Receipts at auto dealerships rose 1.0 percent after falling 0.6 percent in March. Excluding autos, sales dropped 0.1 percent after falling 0.4 percent in March.
Though falling gasoline prices pushed down receipts at gasoline stations, sales excluding gasoline recorded their largest increase since December.
Stripping out gasoline and autos, sales rose 0.6 percent.
Sales at building materials and garden equipment suppliers increased 1.5 percent, the largest rise since September. That reflects gains in homebuilding as the housing market recovery gains momentum.
Receipts at clothing stores rose 1.2 percent, the biggest increase since February last year.
Sales at sporting goods, hobby, book and music stores gained 0.5 percent. Receipts at electronics and appliances stores increased 0.8 percent, while sales at furniture stores were flat. Sales at restaurants and bars also increased.
However, receipts at grocery stores fell.
9 Numbers That'll Tell You How the Economy's Really Doing
U.S. Retail Sales Rise Unexpectedly in April
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.