Retail sales drop unexpectedly in April-WEB ONLY

Retail sales fell for a second straight month in April, a disappointing
performance that raised doubts about whether consumers were regaining their
desire to shop. A rebound in consumer demand is a necessary ingredient for
ending the recession.




The Commerce Department said today that retail sales fell 0.4 percent last
month. Many economists had expected a flat reading, and the April weakness
followed a 1.3-percent drop in March that was worse than first estimated.

Retail sales had posted gains in January and February after falling for six
straight months, raising hopes that the all-important consumer sector of the
economy might be stabilizing. But the setbacks in March and April could darken
some forecasts because consumer spending accounts for about 70 percent of
economic activity.

The hope had been that consumers were starting to feel better about spending,
helped by the start of tax breaks included in the $787 billion stimulus bill.
Households had spent the fall hunkered down in the face of thousands of job
layoffs and the worst financial crisis since the 1930s.

The latest retail data "are yet another illustration that, although the
worst is now over, there is still no evidence of an actual recovery," Paul
Dales, U.S. economist with
Capital Economics in Toronto,
wrote in a research report.

While anecdotal evidence suggests some improvement in sales in recent weeks,
"to offset the plunge in wealth, the household saving rate still needs to
double from the current rate of 4 percent," Dales wrote. "With
falling employment hitting incomes, this can only be achieved by a further
retrenchment in spending."

The jobless rate rose to 8.9 percent in April when a net total of 539,000 jobs
were lost and 13.7 million people were unemployed, the Labor Department said
last week.

Wall Street tumbled after the weaker-than-expected retail sales report. The Dow
Jones industrial average lost about 130 points in morning trading, and broader
indices also fell.

In a separate report, the Commerce Department said business inventories fell 1
percent in March, a decline that matched economists' expectations. It marked
the seventh straight decrease, the longest stretch since businesses cut
inventories for 15 straight months in 2001 and 2002, a period that covered the
last recession.

Businesses are continuing to cut their stockpiles in the face of declining
sales, a development that has intensified the current economic downturn. Still,
the reductions in stockpiles held on shelves and in backlots eventually should
help businesses get their inventories more in line with reduced sales. If that
is the case, any strengthening in consumer demand should lead to increased

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