Washington, March 13 (Bloomberg) -- U.S. retail sales fell last month by the most since November 2001 as Americans bought fewer cars, furniture and building materials, restraining an economy struggling to gain strength. The 1.6 percent drop was three times the median estimate and followed a revised 0.3 percent increase a month earlier, the Commerce Department's figures showed. Not including vehicles, retail sales fell 1 percent, the largest drop since the terrorist attacks in September 2001, after a revised 1.2 percent gain. A snowstorm in the Northeast and an increase in the government's terror alert level dissuaded some shoppers. Rising unemployment, record gasoline prices, worries about a war with Iraq and the weakest confidence in more than nine years are dealing a blow to the consumer. If spending falters, it will be difficult for growth to accelerate because consumer purchases account for two-thirds of the economy. ``Confidence is deteriorating rapidly and consumers are pulling back,'' said Mark Zandi, chief economist at Economy.com in West Chester, Pennsylvania, before the report. ``War fears are now paramount in people's thinking and they are growing increasingly cautious in their spending.'' A 0.5 percent drop in retail sales to $305 billion was expected after a previously reported 0.9 percent decline in January, based on the median of 65 forecasts in a Bloomberg News survey. Economists had also expected a 0.1 percent drop in sales excluding automobiles to $234.4 billion after a previously reported 0.5 percent gain in January.
Auto Dealers
Sales at car and parts dealerships fell 3.4 percent in February after falling 2.6 percent the prior month. General Motors Corp. Chief Executive Officer Rick Wagoner earlier this month said that February ``was a little disappointing'' and warned that rebates were losing their effectiveness. He is counting on an economic rebound to bolster sales. Many economists are playing down hopes for a robust pickup in sales. ``There just isn't that much more room for car sales to pick up in the intermediate future and provide more support for the economy,'' said John Shin, an economist at Lehman Brothers Inc. ``Consumers have already been given so many incentives.'' Sales of building materials declined 7.5 percent in February, the largest decline on record. Furniture store sales declined 1.6 percent last month, the biggest drop since September 2001. Electronic and appliance stores had a 0.5 percent decline in sales after a 1.1 percent slump. Sales of clothing dropped 3.6 percent after a 0.3 percent rise. AnnTaylor Stores Corp., a women's clothing retailer, yesterday said that earnings for the quarter that began in February would fall because cold weather and economic concerns hurt sales. It had previously forecast a rise in first-quarter profit.
Gas Prices
Sales at sporting goods, hobby, book and music outlets decreased 1.6 percent last month, today's report showed. Restaurant sales declined 0.5 percent in February, while grocery stores showed a 1 percent decrease. Gasoline service station sales increased 2.7 percent in February after a 3.8 percent rise the month before, reflecting higher prices. The average price of all grades of gasoline at the pump rose as high as $1.70 a gallon in February, up from January's high of $1.52 a gallon and up 35 percent from $1.26 a gallon at the same point last year. In the week that ended March 10, the average price rose to a record $1.752 a gallon. Sales at department stores increased 0.3 percent after a 0.2 percent drop in January. Sales at catalogue companies and Internet merchants rose 1.3 percent after rising 0.4 percent. The report, along with others showing job losses and waning manufacturing, supports expectations that Federal Reserve policy makers will say after their meeting next week that the economy risks weakening. That would compare with their current assessment that the risks to the economy are balanced between inflation and lackluster growth.
`Easing Bias'
``We have the Fed going to an easing bias,'' said Lehman's Shin. Falling retail sales, combined with ``the sheer magnitude of the job losses that you saw in February, it really does signal more weakness along the way.'' Economists are already marking down growth forecasts for the first half of 2003. The latest Blue Chip Economic Indicators survey projected annual growth rates of 2.2 percent in the first quarter and 2.8 percent in the second quarter, both down 0.4 percentage point from forecasts issued just a month earlier. The list of threats to consumer spending is lengthening. The Standard & Poor's 500 Index has declined in each of the last three years and has continued falling, reducing the value of Americans' stock portfolios. More than half of all U.S households own stocks, the Federal Reserve's latest survey of consumer finances found. The Conference Board's consumer confidence index fell to 64 last month, the lowest in nine years. The price of crude oil reached a 12-year high of $37.78 a barrel last week and has stayed above $30 for the past three months, cutting into the amount that shoppers have to spend on other goods and services. A report last week showed that the U.S. economy lost 308,000 jobs in February, the most since after the terrorist attacks in September 2001, threatening to push the jobless rate beyond the 5.8 percent record in February. //www.quote.bloomberg.com