U.S. retail sales drop curbs recovery optimism

U.S. store sales took a surprising dive in March, figures released Monday show, with even retailing behemoth Wal-Mart Stores Inc. posting lower-than-expected numbers for the month.

Retail sales fell 1.1 per cent, according to the U.S. Commerce Department. Economists were expecting a modest 0.3 per cent gain for March.

The slide marked the first month in 2009 in which retail sales fell. The revised February figure showed an increase of 0.3 per cent; the preliminary results for that month had initially indicated a decline of one-tenth of a percentage point.

In recent weeks, some positive economic indicators had given analysts a sense that the U.S. economy might be stabilizing.

"Unfortunately, the March U.S. retail sales number came along and stomped all over such optimism with gusto," said Jennifer Lee, an economist with BMO Economics.

Compared with the same month a year earlier, retail sales for March 2009 were off 9.4 per cent.

Retail sales for the January-to-March period were down 8.8 per cent versus the same three months in 2008.

Across-the-board crumble

The retail weakness wasn't just centered in one area.

For the past year, for example, the sales of cars and car parts have been weak. Forecasters had predicted a four-per-cent sales gain in March. Instead, the numbers showed a decline in unit sales of 2.5 per cent .

"In hindsight, it likely reflected a recovery of fleet sales rather than sales to households," Paul Ferley, assistant chief economist for RBC Economic, said in a morning commentary.

Excluding the automotive sector, retail revenue fell by 0.9 per cent, a surprisingly steep decline.

Wal-Mart's wall

One of the big culprits in the U.S. figures was a weaker than hoped month for Wal-Mart. The Arkansas-based firm posted what for many companies would have been a banner month, a sales increase of 1.4 per cent.

But, analysts had thought the world's biggest retailer would gain 3.2 per cent on its sales line for the month.

Still, Ferley estimated that consumer spending for the first quarter of 2009 will rise 1.1 per cent.

"This represents a vast improvement from the 4.3 per cent plunge recorded in the fourth quarter of last year," he said.