US retail sales unexpectedly drop in March

Latest numbers provide further evidence that economic growth is faltering

 

US retail sales unexpectedly fell in March as households cut back on purchases of automobiles, further evidence that economic growth stumbled in the first quarter.

The Commerce Department said on Wednesday that retail sales declined 0.3 per cent last month after being unchanged in February.

Economists polled by Reuters had forecast retail sales edging up 0.1 per cent last month.

Retail sales excluding automobiles, gasoline, building materials and food services ticked up 0.1 per cent last month after an upwardly revised 0.1 per cent gain in February. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Economists had forecast core retail sales rising 0.3 per cent last month. Consumer spending accounts for more than two-thirds of US economic activity. March’s weak reading added to recent data on trade, wholesale inventories and business spending in suggesting the economy hit a soft patch in the first three months of the year. Economic growth estimates for the first quarter are currently as low as a 0.2 per cent annualised rate.

The economy expanded at a 1.4 per cent pace in the fourth quarter.

Retail sales remain lacklustre despite a strengthening labour market, which is starting to boost wages. Part of the weakness could be due to a stock market sell-off early this year, which hurt consumer sentiment.

The value of sales is also being restrained by low prices, as retailers offer huge discounts to clear unwanted merchandise clogging up warehouses. Last month, car sales dropped 2.1 per cent, the largest decrease in just over a year, after being unchanged in February.

Households are buying fewer automobiles after record purchases last year. Receipts at service stations rose 0.9 per cent in March, the biggest gain since June, as gasoline prices turned higher. Other data in the report were generally mixed. Receipts at clothing stores fell 0.9 per cent.

Sales at online retailers dipped 0.1 per cent and receipts at sporting goods and hobby stores rose 0.2 per cent.

Sales at electronics and appliance outlets rose 0.1 per cent. Building materials and garden equipment store receipts increased 1.4 per cent, while sales at restaurants and bars fell 0.8 per cent.

Reuters