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Retail sales fall unexpectedly in March

WASHINGTON - Retail sales fell unexpectedly in March, delivering a setback to hopes that the economy’s steep slide could be bottoming out.

The Commerce Department said Tuesday 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 fell 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.

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, contracted at an annual rate of 6.3 percent in the final quarter of last year, the biggest slide in a quarter-century. It was 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.

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.

The current recession began in December 2007 and is expected to become the longest downturn in the post World War II period. While many economists believe it could end by this fall, they expect unemployment will keep rising until this time next year, possibly as high as 10 percent.