Retail sales fall unexpectedly in March

WASHINGTON — Retail sales fell unexpectedly in March, delivering a setback to hopes that the economy's steep slide could be bottoming out.

The Commerce Department said Tuesday that retail sales dipped 1.1 percent in March. It was the biggest decline in three months and a much weaker showing than the 0.3 percent increase that analysts expected.

A big drop in auto sales led the overall slump in demand. Sales also plunged at clothing stores, appliance outlets and furniture stores.

Meanwhile, the Labor Department reported that wholesale prices plunged 1.2 percent in March as the cost of gasoline, other energy products and food fell sharply.

Gas prices fell 13.1 percent, the steepest drop since December, while food costs dipped 0.7 percent. Excluding volatile food and energy prices, the Producer Price Index was unchanged, below analysts' forecasts of a 0.1 percent rise.

Seasonal adjustments could partly explain the unexpectedly weak showing for retail sales. The March 2008 performance had been boosted by an early Easter, while the holiday did not occur this year until April, delaying some shopping.

The overall economy, as measured by the gross domestic product, fell at an annual rate of 6.3 percent in the final quarter of last year, the biggest slide in a quarter-century led by the largest drop in consumer spending in 28 years. Consumer spending is closely watched because it accounts for about 70 percent of total economic activity.

The 1.1 percent drop in retail sales last month followed a revised 0.3 percent increase in February, originally reported as a 0.1 percent fall. Retail sales rose 1.9 percent in January, which followed six straight months of declines.

For March, auto sales fell 2.3 percent, following a 3 percent drop in February. Auto sales in March were 23.5 percent below year-ago levels as automakers struggle through their deepest downturn in decades.

General Motors Corp. and Chrysler LLC have received billions of dollars of support from the government in recent months with the administration demanding more painful restructuring before the companies will get further bailout assistance.

Excluding autos, retail sales fell 0.9 percent after a 1 percent rise in February. That also was worse than analysts' forecasts of a flat reading for last month.