US retail sales slide in March

US retail sales slide in March
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: April 14 2009 14:23 | Last updated: April 14 2009 16:29
http://www.ft.com/cms/s/0/24079c14-2867-11de-8dbf-00144feabdc0.html


US retail sales fell in March, dashing recent hopes that consumer spending might finally be stabilising in the US as a savaged labour force continues to curb its spending.

Sales declined by 1.1 per cent in March against the previous month and were off by 9.4 per cent from a year ago, commerce department figures showed on Tuesday. The results disappointed analysts who expected a small increase and were due to slowing sales of cars, car parts, electronics and appliances.

“Clearly households remain reluctant to spend on non-essential items,” said Paul Dales, US economist at Capital Economics.

The figure follows a revised 0.3 per cent jump in February and blunted progress shown in the previous two months. Mr Dale notes that the retail sales total of $344.4bn is just 1 per cent above December’s trough and 10 per cent below June’s peak of in the latest cycle.

Retail sales, which last year suffered calamitous drops, are a crucial indicator for gauging the state of the American economy because consumer spending accounts for almost 70 per cent of US gross domestic product.

“For now this looks like something of a reality check after a run of upside data surprises,” said Ian Sheperdson, chief US economist at High Frequency Economics.

Economists and policymakers have been looking for signs of hope after months grim data. On Tuesday Ben Bernanke, chairman of the US Federal Reserve, said recent figures on home sales, homebuilding and consumer spending were “tentative signs” that the sharp decline in economic activity is slowing.

March sales figures from leading US retailers had provided some shimmers of light amid the prevailing gloom, with a number of store chains reporting signs of an increased readiness to spend by still-cautious consumers. Still, most big retailers reported that comparable stores sales were off last month.

A separate report on Tuesday revealed that US wholesale prices fell in March after two months of gains due to falling energy prices.

The producer price index for finished goods fell by 1.1 per cent last month, trailing economists forecasts that prices would be flat. Compared with March 2008, wholesale prices were down by 3.5 per cent.

The decline was due to a 13.1 per cent drop in petrol prices. Excluding food and energy, core producer prices were flat last month. Weak capital spending also blunted any inflation as business investment has stalled amid diminished demand.

Companies have been working to reduce their inventories in expectation of continued weak demand. Business inventories in February fell by 1.3 per cent form the month before and were off by 3.5 per cent year-on-year. Sales ticked up 0.2 per cent, resulting in an inventories-to-sales ratio of 1.43.

“Aggressive moves to keep inventories under control in the face of weak final demand will continue to contribute to a declining trend in orders, production, and imports as the cyclical downturn persists,” said Joshua Shapiro, chief US economist at MFR.

Last week commerce department figures showed that stocks at wholesalers fell 1.5 per cent in February from the month before, more than twice as much as economists predicted and the sharpest monthly fall since records began in 1992. For the year inventories were down 1.7 per cent.