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Business & Technology

Retail sales post solid gains; inventories rise by strongest amount in five months

April 16th, 2007 10:21 pm by Associated Press



WASHINGTON - Retail sales rose in March at the fastest clip in three months, helped by warmer weather and an early Easter.


Analysts cautioned that sales were likely to slow in April, given the recent surge in gasoline prices that will leave consumers with less money to spend on other items.


For March, sales rose by 0.7 percent, the Commerce Department reported Monday. And the government revised its estimate for sales in February from a lackluster 0.1 percent to a stronger 0.5 percent gain.


The March increase, the strongest since a 1.1 percent rise in December, was helped by the fact that Easter came eight days earlier than last year, boosting shopping in March.


Warmer weather during the month put consumers in a buying mood after a cold and snowy February.


On Wall Street, investors were encouraged by the strong jump in retail sales. The Dow Jones industrial average rose 108.33 points to close at 12,720.46. Some giant retailers are already warning that April is proving challenging. Consumer confidence has been faltering because of the continued slump in housing prices and the surge in gasoline costs.


Wal-Mart Stores Inc., whose customers cut back on shopping when gas prices were high last year, said April's selling environment would be tough while Federated Department Stores Inc. said its first-quarter sales will come in at the low end of expectations.


Still, economists said it was a good sign for the overall economy that retail sales have held up as well as they have.


"Consumer spending continues to soldier forward in spite of higher gasoline prices and a sharp slide in consumer sentiment," said Brian Bethune, an economist at Global Insight.


Consumer spending, which accounts for two- thirds of total economic growth, will slow to around 2.1 percent in the current April-June period before rebounding to around 2.5 percent in the second half of the year, Bethune predicted.


The overall increase in retail sales last month reflected in part the higher price for gasoline. Sales at gasoline stations surged by 3.1 percent in March.


Sales at general merchandise stores, a category that includes department stores, rose by 1.1 percent last month while sales at specialty clothing stores were up an even stronger 2.4 percent.


Auto sales rose 0.4 percent. Excluding autos, sales rose by 0.8 percent.


In addition to gasoline stations and clothing and general merchandise stores, strength last month came at furniture stores, hardware stores, restaurants and sporting goods stores.


In a second report, the Commerce Department said that businesses boosted their inventories held on shelves and backlots by 0.3 percent in February, the biggest gain since last September. The increase came after an extended period in which companies had slowed restocking to make sure inventory levels did not get too high. A third report showed continued troubles in housing. The National Association of Home Builders said that its index of builder sentiment dropped to 33 in April, the lowest reading since December. The decline was blamed on rising mortgage defaults which were causing lenders to tighten their loan standards. "The tightening of mortgage lending standards in connection with the subprime crisis has shaken the confidence of both consumers and builders," said David Seiders, chief economist for the home builders. --- On the Net: Retail sales: http://www.census.gov/retail Inventories: http://www.census.gov/bussales Home builders' survey: http://www.nahb.com AP-CS-04-16-07 1838EDT


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