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Consumer spending dips { May 15 2003 } Original Source Link: (May no longer be active)
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Story last updated at 9:28 a.m. Thursday, May 15, 2003
Consumer spending dips 0.1%
Economists say retail sales didn't get postwar boost
BY JEANNINE AVERSA
Associated Press
WASHINGTON--Worried about evaporating jobs, cautious consumers sent retail sales down slightly in April, fresh evidence that the end of the Iraq war hasn't produced a quick economic boost.
The Commerce Department reported Wednesday that sales at the nation's retailers dipped by 0.1 percent in April from the month before as consumers -- the main force keeping the economy going -- trimmed spending on clothing, furniture and building supplies.
"One sure way to get a consumer to cut spending is to take away his or her job or show them the unemployment lines, which are getting longer," said Richard Yamarone, an economist with Argus Research Corp.
The nation's unemployment rate jumped to 6 percent in April and economists expect it to creep higher in coming months. The economy has lost a half million jobs in the past three months, a decline usually associated with recessions.
In March, consumers splurged and pushed sales up by 2.3 percent. April's declining retail activity disappointed economists and suggested economic growth in the current April-June quarter got off to a lackluster start.
"If we were at the Fed, we'd be sweating bullets over the lack of any postwar bounceback," lamented David Rosenberg, chief economist at Merrill Lynch.
Last week, the Federal Reserve opted to hold a key interest rate at a 41-year-low of 1.25 percent with the hope that will motivate consumers and businesses to spend and invest more, helping the listless economy.
The drop in retail sales in April was exaggerated by sales at gasoline stations, which plunged 5.9 percent, reflecting lower prices at the pump. Excluding sales at gasoline stations, retail sales went up by a modest 0.4 percent in April.
Still, economists were concerned about pockets of weakness displayed in the report.
Sales at clothing stores fell 3.2 percent in April, unwinding a 3 percent gain the month before. At department stores, sales dropped by 1.4 percent last month, on top of a 0.8 percent decline in March.Furniture stores sales dipped by 0.3 percent, compared with a 5 percent rise in March. And, sales at building and garden supply shops went down 0.2 percent, after a 7.3 percent gain. At bars and restaurants, sales dropped 0.5 percent, after a 1.9 percent increase.
Although sales at automobile dealerships rose by 2.5 percent in April, they were down from a 5 percent gain in March.
Excluding auto sales, which can swing widely from month to month, retail sales declined 0.9 percent in April. That was the worst showing since the September 2001 terror attacks and marked a weaker performance than the 0.2 percent increase economists were predicting.
On a more positive note, sales of sporting goods, books and music rose 1.2 percent, an improvement from March's 0.9 percent decline. At health and beauty stores, sales increased 0.4 percent, on top of a 0.7 percent advance.
"Consumers are tentative," said economist Ken Mayland, president of ClearView Economics. "They are lacking commitment to the recovery. But they are not in a situation where they are battening down the hatches, either."
President Bush wants Congress to approve more tax cuts, which he argues would bolster growth and create jobs.
Although consumers are cautious, they are spending sufficiently to prevent a new recession. But businesses, unsure about the strength of the recovery, are wary of big capital spending and hiring. That's a major factor hampering a full economic turnaround.
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