(AFP) – Apr 10, 2008
WASHINGTON (AFP) — The housing downturn, a lack of once easy credit and rocketing gasoline prices sapped Americans' wallets and purses last month as retailers across the country reported lower sales.
A monthly survey by the International Council of Shopping Centers (ICSC) showed Thursday that comparable US chain store sales slumped 0.5 percent in March compared with the same month a year ago.
The consumer pullback marked the weakest monthly sales reading in 13 years and economists said it showed Americans are cutting back their spending amid fears the economy could be falling into a recession.
"US consumers, up until recently the most powerful force on planet Earth, are in retreat," Joseph Quinlan, a chief market strategist for Bank of America, wrote in a research note.
"Staples are in, luxury items are out. Small cars are back. Demand for steaks has declined -- think ground beef."
An increasing number of economists believe the world's largest economy will endure a recession during the first half of this year, especially if the legendary American consumer cuts back on shopping trips to the mall.
Falling home values and higher gasoline prices are forcing many consumers to become more budget conscious while a credit crunch has made it harder for Americans to get bargain-rate loans from cash starved banks.
The housing slump has sparked credit difficulties for some of America's biggest banks and economists fear many consumers are struggling to remain on their feet amid harder economic times.
Consumer spending is a vital motor for the US economy because it accounts for around two-thirds of all economic activity.
Michael Niemira, ICSC's chief economist, said the latest retail sales snapshot shows consumers are concerned about the economy.
"Looking forward to April, record high gasoline prices and consumers' worry about the economy will continue to curb discretionary spending power," Niemira predicted.
He said an earlier than usual Easter holiday cut into the number of shopping days last month, but that "weakness" spanned clothing shops, department stores and even hit luxury retailers.
JC Penney, one of America's leading retailers, which operates over 1,000 department stores said its comparable store sales tumbled 12.3 percent for the five weeks ended April 5.
The national retailer said its sales declines were "broad-based" and affected most merchandise categories, but some companies maintained positive sales last month.
Wal-Mart Stores said it had experienced some "softness" in sales of certain goods, but the retail giant saw its US sales rise 0.7 percent in the five weeks ended April 4.
The Arkansas-based retailer said food sales had helped it survive what had been a difficult period for other firms.
"Store sales were weak across the board in March. Wal-Mart and Costco did best. CVS and Macy's have simply stopped reporting monthly numbers," said Robert Brusca, an economist at FAO Economics.
Big auto manufacturers are also feeling the chill of leaner economic times. According to some counts, sales of new vehicles in the United States are at the lowest ebb in 15 years.
Analysts said that rising unemployment levels may have persuaded some consumers to rein in spending and save more cash for a potential "rainy day" fund.
Despite growing recession worries, some economists are optimistic that a flurry of Federal Reserve interest rate cuts and a gargantuan 168-billion-dollar economic stimulus will help fire up economic momentum later this year.
The ICSC report is based on a survey of sales at 37 chain stores.
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