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U.S. Retail Sales Unexpectedly Fall for Second Month (Update1)
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By Courtney Schlisserman
May 13 (Bloomberg) -- Retail sales in the U.S. unexpectedly dropped in April for a second month, indicating that the rising unemployment rate is prompting consumers to boost their savings.
The 0.4 percent decrease followed a revised 1.3 percent drop in March that was larger than previously estimated, the Commerce Department said today in Washington. Excluding auto dealers, sales fell 0.5 percent.
Fewer jobs, falling home values and the biggest loss of household wealth on record may limit consumers’ ability to spend for years, analysts said. As long as the biggest part of the economy is constrained, any recovery from the worst recession in at least half a century is likely to be subdued.
“The consumer remains in a difficult situation,” Maxwell Clarke, chief U.S. economist at IDEAglobal in New York, said in a note to clients before the report. “It remains unclear how they will proceed forward as credit access fades alongside further home price deterioration and an increasingly difficult financial environment.”
Stock-index futures slid and Treasuries climbed after the report. Contracts on the Standard & Poor’s 500 Stock Index dropped 1.8 percent to 890.50 at 8:37 a.m. in New York. Benchmark 10-year note yields fell to 3.13 percent from 3.18 percent late yesterday.
Economists’ Outlook
Economists forecast sales would be unchanged, according to the median of 67 projections in a Bloomberg News survey, after a previously reported 1.2 percent drop in March. Estimates ranged from a 0.8 percent decline to an increase of 1.1 percent.
Excluding autos, sales were projected to rise 0.2 percent after a 1 percent decrease a month earlier, according to a Bloomberg survey.
The decline in sales was led by falling demand at electronics, furniture, clothing and grocery stores.
Receipts at service stations also fell in April, even as fuel prices climbed, indicating Americans may be cutting back on driving to save money.
Sales at clothing retailers decreased 0.5 percent. Those at general-merchandise stores fell 0.1 percent.
The figures run counter to an industry report last week that showed demand improved. April same-store sales rose 0.7 percent, the first gain since September, according to the International Council of Shopping Centers, the New York-based trade group that measures sales at about 40 retail chains.
‘Working’ Through
“We’re still working our way through the slowdown,” said Mike Niemira, chief economist at the ICSC. “I think it will get better as the year progresses. The month of May will still be tough and I suspect by the summer that things will be a little broader in terms of the improvement.”
Kohl’s Corp. and BJ’s Wholesale Club Inc. were among retailers last week that said first-quarter preliminary earnings exceeded their forecasts and April sales signaled shoppers are returning to stores. Wal-Mart Stores Inc., the world’s largest retailer, said sales at U.S. stores open at least a year rose 5 percent, also beating estimates.
Car dealers, unexpectedly, were among the retailers that showed an increase last month. Auto sales gained 0.2 percent after dropping 2 percent in March. The government figures don’t always correlate with industry reports issued earlier in the month.
Car Sales
Autos sold at a 9.3 million annual pace in April, compared with a 9.9 million rate in March, according to industry data. Chrysler LLC, whose U.S. sales tumbled 48 percent in April from the same month last year as bankruptcy neared, said last week it will offer rebates of as much as $6,000 to boost demand. The incentives began May 6 and end June 1.
The sales figures used to calculate gross domestic product, which exclude auto dealers, service stations and building material stores, decreased 0.3 percent in April after falling 1 percent a month earlier. The government uses the auto industry figures rather than the reports from dealers in calculating GDP.
Sales fell even as sentiment started to rebound. Consumer confidence jumped in April by the most since 2005, according to a report last month by the Conference Board, a New York-based private research group.
Payrolls fell by 539,000 workers last month, the smallest drop since October, the Labor Department reported last week. Still, the jobless rate climbed to 8.9 percent, the highest level since 1983, and economists surveyed this month project joblessness will average 9.6 percent in 2010.
The survey also showed consumer spending will be unchanged this quarter after rising 2.2 percent the first three months of the year. Last month, economists had forecast spending would fall at a 0.5 percent annual pace in the second quarter.
To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net
Last Updated: May 13, 2009 08:43 EDT
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This story destroys the nonsense from wall Street and the WH that we are in recovery mode and that things are improving.