Retail sales fell unexpectedly in March, delivering a possible setback to hopes that the economy’s steep slide could be bottoming out.
The Commerce Department said today that retail sales dipped 1.1 percent in March. It was the biggest decline in three months and a much weaker showing than the 0.3-percent increase that analysts expected.
A big drop in auto sales led the overall slump in demand. Sales also plunged at clothing stores, appliance outlets and furniture stores.
Meanwhile, the Labor Department reported that wholesale prices plunged 1.2 percent in March as the cost of gasoline, other energy products and food fell sharply.
Gas prices fell 13.1 percent, the steepest drop since December, while food costs dipped 0.7 percent. Excluding volatile food and energy prices, the Producer Price Index was unchanged, below analysts’ forecasts of a 0.1-percent rise.
Federal Reserve Chairman Ben Bernanke said today there’s been “tentative signs” that the recession may be easing. But he also warned that any hope for a lasting recovery hinges on the government’s success in stabilizing shaky financial markets and getting credit to flow more freely again.
“Recently we have seen tentative signs that the sharp decline in economic activity may be slowing,” Bernanke said. “A leveling out of economic activity is the first step toward recovery. To be sure, we will not have a sustainable recovery without a stabilization of our financial system and credit markets.”
In a separate report, the Commerce Department said business inventories fell for a sixth straight month in February. The 1.3-percent decline matched the January drop and was close to the 1.2-percent fall that economists had expected.
Seasonal adjustments could partly explain the unexpectedly weak showing for retail sales. The March 2008 performance had been boosted by an early Easter, while the holiday did not occur this year until April, delaying some shopping.
The overall economy, as measured by the gross domestic product, fell at an annual rate of 6.3 percent in the final quarter of last year, the biggest slide in a quarter-century, led by the largest drop in consumer spending in 28 years. Consumer spending is closely watched because it accounts for about 70 percent of total economic activity.
The 1.1-percent drop in retail sales last month followed a revised 0.3 percent increase in February, originally reported as a 0.1-percent fall. Retail sales rose 1.9 percent in January, which followed six straight months of declines.
For March, auto sales fell 2.3 percent, following a 3-percent drop in February. Auto sales in March were 23.5 percent below year-ago levels as automakers struggle through their deepest downturn in decades.
Excluding autos, retail sales fell 0.9 percent after a 1-percent rise in February. That also was worse than analysts’ forecasts of a flat reading for last month.
Sales at appliance stores fell 5.9 percent last month and furniture stores reported a 1.7-percent decline. Sales at specialty clothing stores fell 1.8 percent and dipped 0.2 percent at general merchandise stores, a category that includes Wal-Mart Stores Inc., Target Corp. and Macy’s.
Sales at gasoline stations fell 1.6 percent, while food and beverage stores saw one of the few increases for the month, a rise of 0.5 percent.
Many retailers reported same-store sales declines for March, but some boosted at least the low end of their quarterly guidance, including TJX Cos., American Eagle Outfitters Inc., Hot Topic Inc., Aeropostale Inc. and J.C. Penney Co.
Wal-Mart said same-store sales excluding fuel rose 1.4 percent in March, failing to meet analysts’ expectations. The world’s largest retailer blamed the timing of Easter for the miss, and said it still expected first-quarter results would be at the high end of its guidance.