US retail sales drop as Americans put brake on SUV purchases
WASHINGTON (AFP) — US retail sales declined 0.2 percent in April, as consumers put a brake on purchases of fuel-guzzling sport utility vehicles, a government report showed Tuesday.
A steep drop in April vehicles sales, which weighed down overall retail sales, suggests Americans are feeling the pinch of rocketing gasoline prices and tougher economic times.
Stripping out auto sales, "core" retail sales rose a stronger-than-expected 0.5 percent, according to a monthly snapshot by the Commerce Department.
"Headline sales were down ... with weakness concentrated in auto sales. Weakness in this category is tied closely to soaring gasoline prices," said Aneta Markowska, an economist at Societe Generale.
Most economists had predicted that overall sales would drop 0.2 percent, while anticipating that "core" sales would rise 0.2 percent. The jump in "core" sales was the strongest since January.
The retail sales survey revealed a more subdued picture than March and suggests surging gasoline prices, and housing and credit woes are continuing to squeeze Americans' finances.
The average price of regular gasoline across the United States is 3.73 dollars per gallon (3.8 liters), according to the American Automobile Association.
That means it can currently cost up to 100 dollars to fill the tank of some of the biggest SUVs.
Many economists say the United States will likely endure a recession this year, although the economy grew at a 0.6 percent annualized rate during the first quarter.
Analysts sift through retail sales reports for clues on consumer spending which accounts for some two-thirds of US economic growth. Whether consumers keep spending or cut back their shopping trips will largely determine whether a recession occurs or is averted.
Sales of new vehicles in the United States plummeted to their lowest depths since 1992 last month, according to sales reports from the big auto manufacturers.
Americans shunned buying gasoline-hungry SUVs last month, and opted to buy smaller cars or hybrid models with better fuel efficiency. Truck and SUV sales dived by over 17 percent.
The Commerce Department survey showed that overall auto sales slumped 2.8 percent in April, marking the largest percentage decline in sales since June of last year. Auto sales had fallen 0.5 percent in March.
Gasoline station sales fell 0.4 percent last month as gasoline and crude oil prices spiked. Oil prices have rocketed to record highs in recent days of over 126 dollars a barrel.
"Even gasoline stations rang up lower sales in a month that saw gasoline prices spike. Did everyone start taking the bus?" asked Jennifer Lee, an analyst at BMO Capital Markets.
The report showed that some life might be creeping back into home-related purchases despite the lingering housing market downturn.
Sales of building materials and garden equipment rose 1.9 percent following a 1.5 percent drop in March, while sales of electronics and appliances accelerated to show a gain of 1.4 percent.
Purchases of furniture and home furnishings remained subdued, however, while sales of clothing and fashion accessories held firm with a gain of 0.7 percent.
"While consumers remain under strain from weak employment conditions, falling home values, high energy costs, and tight credit conditions, today's retail sales results point to stronger spending emerging this quarter," said Bank of America economist Peter Kretzmer.
Analysts said retail sales this month will likely benefit from tax rebate checks Americans have begun receiving in the mail, as part of a giant 168-billion-dollar economic stimulus approved by Congress.
Lawmakers hope the stimulus will fire up flagging economic growth.
Retail sales had rebounded 0.2 percent in March, but the government revised core March sales higher to 0.4 percent compared with an initial estimate showing a gain of just 0.1 percent.
