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Consumers stayed home in March
Consumers stayed away from the malls last month as unusually cold weather and late tax refunds took a toll on their usual spring spending fervor.
Retail sales fell by 0.4 percent, dragged down by a 2.1 percent drop in home-improvement and gardening stores, a 0.8 percent decline in sporting goods outfits, a 1.6 percent fall in electronic and appliance outlets, and a 1.2 percent plunge in department stores, the Commerce Department reported Friday morning.
The big drop in fair-weather related spending was offset somewhat by a 0.9 percent jump in sales of home furnishings as consumers padded their nests and stayed inside. Internet sales also rose by 0.3 percent and are up by more than 10 percent in the last year as consumers opted to make purchases in the comfort of home from their easy chairs rather than go to the malls.
“The falloff in spending is no surprise,” said Jack Kleinhenz, chief economist at the National Retail Federation, who noted that the winter was colder than usual in many parts of the country and lasted well into March, while tax refunds that are often spent right away got delayed this year by the congressional standoff over the fiscal cliff last year.
“We remain optimistic that retail sales will grow modestly this year,” he said, as consumers are also benefiting from an early retreat in gasoline prices before the summer driving season, as well as rising house prices, which are bolstering their sense of wealth.
Economists were concerned about the decline in sales as it suggests the economy was losing momentum going into the spring quarter after a relatively robust performance in the first quarter.
“This is a bad report,” said Chris G. Christopher Jr., economist at IHS Global Insight, noting that it prompted the forecasting firm to revise down its estimate of first quarter growth to 2.8 percent from 3.3 percent.
“The first quarter was not very kind to retailers” despite a 1 percent surge in sales during February, he said. “Falling pump prices and a relatively strong stock market did not help retailers very much in March.”
However, some economists point out that the delay in tax refunds, which for lower-income consumers usually come out in January, likely caused many to put off their usual yearly spending splurge when they get big checks from the IRS.
“Modest economic growth has been our mantra for 2013,” and the spotty performance of consumers is reflecting the lack of momentum in the economy, said Tom Porcelli, economist at RBC Capital Markets. “It is clear the consumer lost considerable steam going into the second quarter” and is not getting much support from the withdrawal of tax cuts this year, delayed refunds and anemic growth in incomes.
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