BLBG:Retail Sales in U.S. Dropped in March by Most in Nine Months
Retail sales in the U.S. unexpectedly fell in March by the most in nine months as employment slowed, showing households ended the first quarter on softer footing.
The 0.4 percent decrease, the biggest since June, followed a 1 percent gain in February, Commerce Department figures showed today in Washington. The median forecast of 85 economists surveyed by Bloomberg called for an unchanged reading in March. Department stores and electronics dealers were among the weakest showings.
The figures may prompt economists, who are projecting consumer spending climbed in the first quarter at the fastest pace in two years, to reduce growth estimates. A pickup in hiring and bigger increases in wages will be needed to ensure any slowdown proves temporary as federal budget cuts restrain the world’s largest economy.
“Consumers are still on somewhat shaky ground,” Scott Anderson, chief economist at Bank of the West in San Francisco, said before the report. “We need more evidence that the spurt of activity seen early in the year is sustainable.”
Economists’ sales estimates in the Bloomberg survey ranged from a decline of 0.6 percent to an advance of 0.7 percent. The February reading was revised from an initially reported 1.1 percent increase, and January was cut to a 0.1 percent drop from a previously reported 0.2 percent gain.
Seven of 13 major categories showed declines last month, led by a 1.2 percent decrease at general merchandise outlets, which includes department stores, and a 1.6 percent drop at electronics dealers.
Auto Sales
Sales at automobile and parts dealers fell 0.6 percent after a 1.3 percent gain the prior month, today’s report showed. Industry figures, which are the ones used to calculate gross domestic product, showed car and light truck sales dipped in March, falling to a 15.2 million annual rate from 15.3 million the prior month, according to Ward’s Automotive Group. The first quarter sales average was the highest since 2008.
Retail sales excluding autos decreased 0.4 percent, today’s report showed. They were projected to be little changed, according to the Bloomberg survey median.
The retail sales figures, which aren’t adjusted for prices, reflected less expensive gasoline. The average cost of a gallon of regular fuel at the pump dropped about 13 cents to end last month at $3.63, the first decrease in March since AAA, the biggest U.S. auto group, began keeping data in 2004. Filling- station receipts dropped 2.2 percent last month, according to the Commerce Department data.
Growth Impact
The retail sales category used to calculate GDP, which excludes auto dealers, building-material stores and service stations, sales fell 0.2 percent after a 0.3 percent increase in the previous month.
March’s weaker sales data comes after demand strengthened at the end of 2012 and into this year. Consumer spending advanced at a 1.8 percent rate from October to December, according to Commerce Department data. It rose at a 3 percent rate from January to March, the most since the first quarter of 2011, according to median projection of economists surveyed by Bloomberg this month.
Sales held up even as taxes took more from Americans’ paychecks. Congress agreed to a fiscal pact on Jan. 1 that allowed the tax used to finance Social Security to revert to 6.2 percent from 4.2 percent.
Economists project demand will wane this quarter. Consumer spending will probably slow to a 1.8 percent pace from April through June, according to the Bloomberg survey of 59 economists taken from April 5 to April 9.
Employment Cools
Payrolls grew by 88,000 last month, the smallest increase since June, the Labor Department said on April 5. Average hourly earnings were unchanged in March from the prior month, the weakest showing since October.
Recent reports have added to concern that across-the-board government budget cuts, known as sequestration, will impede progress made in the job market. Reductions in planned spending, which began March 1, trim 5 percent from domestic agencies and 8 percent for the Defense Department this fiscal year.
“Clearly the economy is still pressuring the consumer out there,” Ken Martindale, chief executive officer of drugstore chain Rite Aid Corp. (RAD), said during an April 11 earnings call. “We’re sticking with our promotional program. We’d like to get less dependent on promotions.”
To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
