US retail sales dropped unexpectedly in April, government data showed Wednesday, revealing ongoing caution among consumers in the face of recession despite big government recovery efforts.
Retail sales fell 0.4 percent in April, the Commerce Department reported Wednesday in data which is seasonally adjusted but not for price changes.
The April decline surprised most analysts, who had expected sales would be unchanged from March.
The report trampled on "green shoots" hopes the economic downturn may be bottoming, optimism that has been spurred by a recent spate of better-than-expected data.
The Commerce Department also said March retail sales were weaker than previously estimated, a decline of 1.3 percent instead of 1.2 percent.
US and European shares tumbled after the release of the signal on consumer spending that normally drives two-thirds of output in the world's largest economy.
The stock market was rife with "fears that the recent signs of recovery in the economy may have hit a snag, exacerbated by an unexpected drop in April retail sales and further revisions to the previous month's reading," analysts at Charles Schwab & Co wrote.
April marked the second consecutive month of falling sales, after two months of increases that had snapped a six-month pullback last seen in the early 1980s.
Analysts said consumers, like businesses, were conserving their cash as they face rising unemployment, a housing crisis and falling wealth as their investments shrink in the worst economic crisis since the 1930s Great Depression.
Ian Shepherdson at High Frequency Economics, said the report suggested "greens shoots withering" in the economy.
"This is a disappointing report," he said. "There is no momentum in spending; the freefall is over but shredded balance sheets and declining incomes mean a broadly flat trend is about the best we can expect."
Patrick O'Hare at Briefing.com agreed.
"It is starting to look like the consumer spending gains in January and February were just rebounds off a very weak fourth quarter, supported by strong seasonal factors," O'Hare said.
"With unemployment continuing to rise and wage gains stagnating, the outlook for consumer spending remains poor," he said.
Excluding food, April retail sales fell 0.4 percent.
Automobile sales, which have tanked amid the recession, rose 0.2 percent in April but remained 20.7 percent below the year-ago level.
Excluding auto sales, the retail sales index dropped 0.5 percent in April after a sharper 1.2 percent decline in March.
On an annual basis, retail sales were 10.1 percent below the April 2008 level.
Scott Hoyt at Moody's Economy.com said the April retail sales decline was a surprise in light of President Barack Obama's huge 787-billion-dollar stimulus package which took effect in March.
"Consumers benefited from reduced tax withholding as part of the stimulus package and tax refunds that are running nearly double last year's pace," Hoyt said.
"Clearly, however, there is little upward trend to spending now," he said.
"In the face of a still very difficult job market, huge losses in wealth, and dramatically reduced access to credit, spending is not rising to any significant degree," he said.
TXT 24
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