WASHINGTON – U.S. retail sales fell last month as Americans cut back on their car purchases, the latest sign that consumers are reluctant to spend freely.
A 2.1 per cent plunge in auto sales — the steepest such fall in more than a year — accounted for most of last month’s drop. But sales were weak in some other sectors, including clothing, restaurants, and at online and catalogue stores.
Overall retail sales fell by a seasonally adjusted 0.3 per cent in March, the Commerce Department said Wednesday, following a flat reading in February and a drop in January.
Americans have been more cautious about spending this year than most economists expected, despite steady job gains and lower gas prices. That’s a key reason why analysts now think the economy barely expanded in the first quarter.
Car purchases have slowed this year after reaching record levels in 2015.
Still, there were some faint signs of consumer health in the report. Excluding autos and gas, sales trends look healthier, rising 0.1 per cent last month and 0.6 per cent in February.
Sales in March jumped 1.4 per cent at home supply stores, and rose at furniture, electronics and health retailers. General merchandise stores, which include chains such as Walmart and Target, also posted higher sales.
The retail report provides the first indication each month of Americans’ spending, which drives 70 per cent of the economy. Retail sales account for only about one-third of all spending, with services such as haircuts and Internet access making up the other two-thirds.
Steve Murphy, an economist at forecasting firm Capital Economics, said that spending on services has growth at a 3 per cent clip this year, offsetting some of the weakness in retail.
“With employment gains still healthy and real incomes growing at a solid pace, we expect consumption growth to rebound further over the first half of the year,” Murphy said in a note to clients.
Sales at gas stations rose by the most since June, reflecting recent increases in oil and gas prices. The average nationwide price for a gallon of gas stood at $2.06 on Tuesday, according to AAA, up 14 cents since mid-March. Still, gas prices remain far below their levels one year ago.
But a category that includes online and catalogue sales declined slightly, and spending at restaurants and bars fell 0.8 per cent.
The economy is increasingly dependent on consumer spending to drive growth this year. Weak overseas economies and a strong U.S. dollar have dragged down exports, while business spending on new machinery and equipment has been lacklustre.
Yet so far, Americans have been reluctant to open their wallets. That’s left the economy stumbling in the first quarter, with analysts at JPMorgan Chase forecasting growth of just 0.2 per cent at an annual rate.