WASHINGTON (AFP) — US retail sales slumped more than expected in in February as consumers retrenched in the face of economic turmoil and rising energy costs, the government reported Thursday.
Overall February retail sales fell 0.6 percent from January, the Commerce Department said.
Core retail sales, excluding volatile motor vehicle sales, dipped by 0.2 percent. Economists closely monitor the core reading as a truer indicator of consumer spending that drives the economy.
The 0.6 percent fall in the headline number was far steeper than analysts' consensus forecasts of a 0.2 percent decline in both indicators.
The report showed declines in a broad range of categories from autos to home furnishings to food.
This report is "the final piece in the recession puzzle," according to BMO Capital Markets economist Sal Guatieri, "upping the odds of a 0.75 percentage point Fed rate cut on Tuesday."
The Federal Reserve has slashed its base federal funds rate by 2.25 points since September in a bid to boost economic momentum which depends largely on consumer spending.
Most analysts expect the Fed to again lower the rate, currently at 3.0 percent at its meeting next Tuesday.
After the retail report's release, President George W. Bush's administration urged US consumers to shop and stressed the economy's strength in the long run.
"We do want to see the consumer spend, and that's one of the reasons for the rebate checks," White House spokesman Tony Fratto said, referring to a key component of a stimulus package valued at 168 billion dollars.
"The big message is that you can have confidence in the long-term future of our economy," he told reporters.
The February report showing Americans were closing their wallets heightened concerns the world's biggest economy is falling into, or already is in, recession. Economists generally define recession as two consecutive quarters of economic contraction.
The "very dismal retail sales number ... puts us closer to at least one quarter of negative growth," said Peter Cardillo, an analyst at Avalon Partners.
Robert Brusca at FAO Economics said that "on balance, the data are bad but not terrible."
Brusca said it was "still not clear" whether there was enough weakness to make negative GDP growth in the first quarter, after an anemic 0.6 percent pace in the 2007 final quarter and robust 4.9 percent growth in the third quarter.
"With consumption this weak, look for imports to remain weak and inject some growth back in," he added.
The Commerce Department revised upward its January retail sales data, to 0.4 percent for the overall index and 0.5 percent for core sales, from an initial estimate of 0.3 percent for both indices.
Auto sales fell 1.9 percent in February. Gasoline prices were off approximately two percent last month. Economists say actual sales volume of motor fuel has been falling as consumers cut back on discretionary driving.
Excluding gas stations, sales were down 0.5 percent and excluding both autos and gasoline, retail sales were down a much less severe 0.1 percent.
Grocery store sales fell 0.3 percent from January to February despite widespread increases in food costs.
General merchandise stores, including discounters such as Target and Wal-Mart, were the major exception to the retreat in consumer spending, posting a 0.4 percent increase for February.
Clothing, health care and sporting goods stores also reported sales increases for the month.
Housing-related and other generally big-ticket stores including furniture, electronics and building materials showed declines.
Department store sales were down 0.2 percent.
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