Service industries in U.S. expanded less than forecast in March

Retail Sales

Merchants projecting the pace of sales will be sustained include Macy’s, the second-largest U.S. department-store chain. The Cincinnati, Ohio-based retailer said sales at stores open at least a year will rise 3.5% this year, after growing 3.7% in 2012.

“We look at the momentum we have coming into the year and we feel quite confident,” Karen Hoguet, chief financial officer, said at a March 14 conference. “That doesn’t mean that we’re not cognizant of all that’s going on in Washington and what’s gone on with the payroll tax.”

Historically low interest rates are giving housing a leg up. Reports for February showed sales of previously owned properties climbed to the highest level in more than three years, and purchases of new houses capped the best back-to-back months in more than four years.

Mortgage Rates

The average rate on a 30-year fixed mortgage was 3.57% last week, according to data from Freddie Mac. Borrowing costs reached a record low of 3.31% in November.

Auto dealerships may also benefit as demand rises. Motor vehicle sales averaged a 15.26 million annual rate in the first quarter, the best quarterly average in five years, after 14.99 million in the final three months of 2012.

“The economic picture looks pretty similar to the last couple of months, which helps to explain why the industry has stayed in a relatively healthy range,” Kurt McNeil, vice president of U.S. sales operations for General Motors Co., said on an April 2 conference call. “ The housing market continues to recover, business spending has picked up, and pent-up demand for vehicles is offsetting any drag from tax or federal spending issues.”

Bloomberg News

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