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Retail sales off again in April, denting hopes of turnaround

WASHINGTON — Retail sales fell in April for a second straight month, dashing hopes that consumer spending was starting to revive and would help end the recession.

Economists said families who are worried about layoffs and unpaid job furloughs are saving more and spending less, delaying the start of a sustained recovery.

Retail sales fell 0.4 percent last month, worse than the flat performance many economists had expected, the Commerce Department reported Wednesday.

Retail sales had posted gains in January and February after falling for six straight months. The recent gains had raised hopes that the crucial consumer sector of the economy might be stabilizing. But the setbacks in March and April retail sales cast doubts on that prospect.

"People are obviously still very nervous and not spending," said David Wyss, chief economist at Standard & Poor's in New York. "The economy is still in a recession, and I don't think we will hit bottom until late summer or early fall."

The worse-than-expected April retail sales reading came despite a 0.2 percent increase in auto sales, which fell 2 percent in March. Excluding autos, the drop in retail sales would have been 0.5 percent, much worse than the 0.2 percent gain economists expected.

Sales outside of autos showed widespread weakness. Demand at department stores and general merchandise stores fell 0.1 percent and sales at specialty clothing stores dropped 0.5 percent.

Sales also fell at furniture stores, electronic and appliance stores, food and beverage stores and gasoline stations.

The performance at department stores and specialty clothing stores came as a surprise since the nation's big chain stores had reported better-than-expected results for April. Same-store sales rose 0.7 percent last month compared with April 2008. It was the first overall increase in six months, according to the tally by Goldman Sachs and the International Council of Shopping Centers.

For April, some mall-based clothing stores saw their declines level off and Wal-Mart Stores Inc., the world's largest retailer, had reported its same-store sales rose 5 percent, excluding fuel, which beat expectations. Same-store sales, or sales in stores open at least one year, is considered a key metric of a retailer's financial health.

The chain store sales report last week showed that Gap, American Eagle and Wet Seal posted smaller sales declines at their established locations than analysts had forecast.

The Children's Place, T.J. Maxx owner TJX Cos. Inc. and teen retailer The Buckle saw bigger gains than expected. But luxury stores again were hard hit as their higher-end wares find fewer takers.

The two reports aren't comparable, analysts noted. The government figures, for example, cover more stores and are adjusted for seasonal variations.

Analysts said one reason the consensus forecast may have been too optimistic is that with many stores closing, it has been difficult to estimate industry figures accurately.

Economists think the overall economy, as measured by the gross domestic product, will show a decline of around 3 percent in the current quarter. That would compare with steep declines of more than 6 percent each in prior two quarters, the worst six-month performance in a half-century.

"The weak start to second quarter consumer spending is a potent reminder that the recession is not over, despite signs of green shoots," said Stuart Hoffman, chief economist at PNC Financial.

facts

Retail sales in rut

Summary of the Commerce Department's retail sales report released Wednesday.

Overall retail sales:

down 0.4 percent

Auto sales: up 0.2 percent

Department stores and general merchandise stores: down 0.1 percent

Specialty clothing stores: down 0.5 percent

Retail sales off again in April, denting hopes of turnaround 05/13/09 [Last modified: Wednesday, May 13, 2009 9:37pm]
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