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Retail sales up 0.1% in February

March 13th, 2007 9:30 pm by Associated Press



WASHINGTON - Sales at the nation's retailers barely budged in February as bad winter weather kept already cautious shoppers away from the malls.


The Commerce Department's report, released Tuesday, raised fresh concerns that consumers could tighten the belt further, causing economic growth to slow even more than anticipated.


Retail sales edged up only 0.1 percent in February. Sales were flat in January as shoppers took a breather after buying briskly during the holidays.


"Households hit the deep freeze when it came to spending," said Joel Naroff, president of Naroff Economic Advisors.


Shoppers in February cut spending on a wide range of goods, including home furnishings, building and garden supplies, clothing, electronics and appliances, and sporting goods, books and music. They also ate out less.


A bright spot was auto sales, which went up by 0.9 percent in February. That followed a decrease of the same size in the previous month.


On Wall Street, stocks tumbled as the weak retail sales report and troubles with risky mortgages added to investors' fears about the country's economic health. The Dow Jones industrial average plunged 242.66 points, its second-biggest drop of the year. The latest retail sales figures were weaker than economists were forecasting. They expected sales would go up by 0.3 percent.


Excluding auto sales, which can swing widely from month to month, sales at all other merchants in February actually dipped by 0.1 percent, the worst performance since October. Economists were predicting a better showing - a 0.3 percent rise - in this category in February.


Consumer spending plays a major role in shaping overall economic activity, and therefore is closely watched by economists.


The economy has been going through a spell of sluggish growth, reflecting the strain from the housing slump and the ailing automotive industry. So far, consumers have been spending sufficiently to keep the economy expanding.


But consumers could clamp down if the housing slump were to get even worse and that could spell trouble for the economy. Gas prices, meanwhile, are rising again. An unanticipated jolt in energy prices also could be jarring to consumers, as well as to the overall economy.


"We expect consumers will become increasingly cautious," said Nigel Gault, economist at Global Insight.


Another report, issued by the Mortgage Bankers Association, underscored the strains facing some consumers.


Late mortgage payments shot up to a 3½-year high in the final quarter of last year and new foreclosures surged to a record high as borrowers with tarnished credit histories had trouble keeping up with their monthly payments.


On the retail front, the performance of sales in January and February suggest consumer spending in the first quarter of this year got off to a bumpy start, analysts said.


The Federal Reserve, which had boosted interest rates steadily for two years to thwart inflation, has left rates alone since August. Many economists predict the Fed will hold rates steady again when it meets next week. The Fed's goal is to slow the economy enough to fend off inflation but not so much as to cripple economic activity.


If the weakness in retail sales persists, it would boost the odds the Fed might consider cutting rates later this year, economists said.


The retail report showed that sales at home furnishings stores fell 1.7 percent, the most since August 2004. A 1.2 percent drop in sales at bars and restaurants was the largest since September 2003. Sales at building and garden supply shops declined by 1.4 percent. Clothing stores sales fell 1.8 percent. Sales at sporting goods, hobby, book and music stores dropped 0.8 percent. Those declines, however, were blunted by stronger sales elsewhere, including auto dealers, food stores and electronic shopping and mail-order firms. In other economic news, the Commerce Department said business inventories of unsold goods rose 0.2 percent in January as sales slid while customers took a post-holiday break. The increase came after a flat reading in December. Businesses, worried that extra supplies of goods might get out of whack with customer demand, have been investing less in their inventories. That was a factor holding back the overall economy's growth in the final quarter of last year. --- On the Net: Retail sales: https://www.esa.doc.gov/ei.cfm AP-CS-03-13-07 1713EDT


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