Washington, April 12 (Bloomberg) -- U.S. retail sales declined in March after stagnating themonth before, as cool weather and fragile consumer confidence crimped spending, governmentand company reports showed. That suggests a rebound in growth may be slow to develop. Sales at retailers fell 0.2 percent in March, the Commerce Department said, as business slowedat auto dealers, building supply outlets and apparel stores. Sears, Roebuck & Co., FederatedDepartment Stores Inc. and Limited Inc. were among chain stores reporting declining sales lastmonth. Consumer spending, which accounts for two-thirds of the U.S. economy, is lackluster becauseof rising unemployment, falling stocks and weaker consumer optimism than six months ago.That gives Federal Reserve policy makers room to lower interest rates by their next meeting onMay 15. ``Households didn't storm the malls in March, but that doesn't mean they have decided toretreat,'' said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania.Consumer spending probably grew at a 2.5 percent to 3 percent annual rate in the first threemonths of the year after a fourth- quarter pace of 2.8 percent, he said. The decrease in March retail sales was led by a 0.8 percent drop in sales at auto dealers. Newvehicle sales fell to 17.1 million units at an annual pace in March, the slowest rate so far thisyear, industry figures showed. Excluding automobiles, sales fell 0.1 percent after falling 0.2 percent in February -- the first back-to-back declines since February-March 1993.
Producer Prices, Jobless Claims
A separate report from the Labor Department showed first-time jobless claims rose by 9,000 to392,000 last week -- the highest level in five years. Labor also said prices paid to producers fellin March for the first time in seven months. The producer price index dropped 0.1 percent duringthe month, reflecting declines in the costs of computers and energy. Consumers were also less upbeat about their finances and the economy this month than theywere in March, according to a study by the University of Michigan. The university's preliminaryindex of consumer sentiment fell to 87.8 in April -- the lowest level since November 1993 -- fromMarch's 91.5. Below-average temperatures in 25 of 30 major U.S. cities tracked by weather-data firmPlanalytics Inc. kept people away from stores. Temperatures were at least 8 percent belownormal in Boston, Buffalo, New York, Chicago, Cleveland, Dallas, Minneapolis, Nashville,Pittsburgh and St. Louis. In March 2000, only four cities tracked by Planalytics had below-normal temperatures, and none was colder by more than 3.5 percent.
Same-Store Sales
Sales at retail stores open at least a year were 1.7 percent higher in March than a year earlier,according to calculations by Bank of Tokyo-Mitsubishi Ltd. That lagged the firm's reducedforecast for a 2 percent to 2.5 percent increase, and trailed February's 3.1 percent gain. Morethan half the companies in the index reported declines in March sales. Sears, the biggest U.S. department store, said its fiscal first-quarter profit fell to about 53 centsper share, less than the average 57-cents-per-share estimate of analysts polled by FirstCall/Thomson Financial and the 65 cents earned a year ago. Unseasonably cool weather and slow economic growth weakened demand for spring clothingand gardening merchandise, Sears said. That caused sales at stores open at least a year to fall5.3 percent in March, compared with a year earlier, after a 2 percent decline in February, thecompany said. Federated, the owner of Macy's, Lazarus, Bloomingdale's and other department stores, saidyear-over-year sales dropped 3.2 percent. Sales fell 4 percent at Limited, the second-largestspecialty apparel retailer in the U.S.
Earnings Forecasts
Along with Sears, Wal-Mart Stores Inc., TJX Cos., Pacific Sunwear of California Inc., SharperImage Inc. and Children's Place Retail Stores Inc. lowered first-quarter earnings forecasts basedon March results. Investors are betting Fed policy makers will respond to declining optimism, sluggish consumerspending and scant inflation by lowering interest rates a fourth time this year by their May 15meeting. Central bankers have reduced their benchmark overnight bank lending rate by 1 1/2percentage points since Jan. 3 to keep the economy from weakening further. ``The focus right now is on economic growth rather than inflation,'' said Fed Bank of DallasPresident Robert McTeer last week. ``Right now the priority is on avoiding a worse slowdownthan we already have and getting the recovery going.'' The economy expanded at a 1 percent annual rate in the fourth quarter, the slowest in 5 1/2years, and probably grew close to that in the first three months of 2001, Fed officials have said.
Stocks, Treasury Notes
Stocks rose on hopes that the economy will rebound later in the year and Treasury securitiesdeclined. The Dow Jones Industrial Average rose 113 points, or 1.1 percent, to close at10,126.94. The Nasdaq Composite Index climbed 63 points, or 3.3 percent, to 1961.4. TheNasdaq has risen four straight days, and was headed for its biggest weekly gain in 10 months.The 10- year Treasury note fell 3/8 point, pushing up its yield 5 basis points to 5.17 percent. Some economists took solace in the fact that spending isn't collapsing and tax refunds andincome from home refinancing may support the economy in coming months. ``The last couple of months the evidence has been mixed but there have been some signs of theeconomy stabilizing,'' said Thomas Hoenig, president of the Federal Reserve Bank of KansasCity, in a speech to Fed officials and business leaders in Nebraska. Hoenig suggested he wasn't particularly concerned by the retail sales reports. ``I wouldn't wantto take one number and draw conclusions,'' he said. ``We really are looking at a whole variety ofdata.'' Tax refunds were higher in the first three months of 2001 than a year earlier, as the averagerefund rose to $1,751 from $1,668. Mortgage refinancing rose in March to the highest level sinceOctober 1998, according to Mortgage Bankers Association of America figures. ``We could easily get a 2.8 percent gain (in spending) in the second quarter and that's not takinginto account delayed tax rebates, or mortgage refinancing kicking in,'' said Diane Swonk, chiefeconomist at Bank One Corp. in Chicago. ``That's real money and it'll be spent.'' Some companies reported gains last month, in line with the government's report showingincreased business at general merchandise stores. While Wal-Mart, the biggest merchant, revised down its earnings estimate, it said same-storesales 3.5 percent in March than a year ago. The company had a 5.5 percent gain in March 2000.Sales also rose 3 percent at warehouse-club chain Costco and a better-than-expected 2.7percent at J.C. Penney's namesake department stores. Monthly sales of building materials, hardware, garden supplies and other goods fell 1.2 percentin March, the Commerce Department report showed. Clothing and accessory store sales fell 0.7percent. Sales of furniture, home furnishings and equipment also declined. Gasoline service station sales dropped as the price of gasoline at the pump fell as low as $1.44a gallon in March, the lowest since February 2000.