WASHINGTON: U.S. retail sales posted their smallest gain in nine months in March, as auto sales plunged and consumers felt the sting of higher gas prices.
In another sign that economic growth slowed in the first quarter, the government on Wednesday, April 13 separately reported a sharp slowdown in the accumulation of inventories by businesses in February.
Economists, who have steadily lowered growth forecasts as first-quarter data has come in, swiftly cut them again. Still, they expect the recovery to regain momentum later this year.
"The recovery and spending in the first quarter shaped up to be a bit of a disappointment, partly because of energy prices, and we are limping into this (second) quarter," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
Retail sales advanced 0.4 percent in March, the Commerce Department said on Wednesday. Excluding gasoline, retail sales were up a scant 0.1 percent.
Economists now see first-quarter gross domestic product growth as low as a 1.4 percent annual rate. Earlier this year, many economists were expecting a pace of around 3.5 percent. The economy grew at a 3.1 percent rate in the final three months of 2010.
Business inventories are a key component of GDP, and less restocking by business also implies a slower pace of production.
Gasoline prices, which accounted for the bulk of the retail sales increase in March, have been a big factor restraining growth. Bad weather early in the year and a still-weak labor market have also weighed on the economy.
"The forces holding back real GDP growth in the first quarter will prove temporary," said Dean Maki, chief U.S. economist at Barclays Capital in New York. "Other major indicators of activity have all been moving in a way consistent with strong, not weak, economic growth."
Businesses are starting to feel the pinch of high energy prices, a Federal Reserve report noted on Wednesday.
In its Beige Book summary of economic conditions, the U.S. central bank said the economy continued to improve over the past month, but higher commodity costs were reported to be putting upward pressure on prices.
EXPENSIVE GASOLINE BOOSTS SALES
Receipts at gasoline stations, which accounted for about 1/10th of overall retail sales last month, increased 2.6 percent after rising 2.4 percent in February.
Gasoline prices rose 35 cents to an average $3.62 a gallon last month, and the U.S. Energy Information Administration warned on Tuesday that prices could increase to about $4 a gallon nationwide this summer.
Upward revisions to January and February sales data took some of the sting out of the report, leaving consumer spending growth tracking at about a 2 percent rate in the first quarter, according to economists. - Reuters
In another sign that economic growth slowed in the first quarter, the government on Wednesday, April 13 separately reported a sharp slowdown in the accumulation of inventories by businesses in February.
Economists, who have steadily lowered growth forecasts as first-quarter data has come in, swiftly cut them again. Still, they expect the recovery to regain momentum later this year.
"The recovery and spending in the first quarter shaped up to be a bit of a disappointment, partly because of energy prices, and we are limping into this (second) quarter," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
Retail sales advanced 0.4 percent in March, the Commerce Department said on Wednesday. Excluding gasoline, retail sales were up a scant 0.1 percent.
Economists now see first-quarter gross domestic product growth as low as a 1.4 percent annual rate. Earlier this year, many economists were expecting a pace of around 3.5 percent. The economy grew at a 3.1 percent rate in the final three months of 2010.
Business inventories are a key component of GDP, and less restocking by business also implies a slower pace of production.
Gasoline prices, which accounted for the bulk of the retail sales increase in March, have been a big factor restraining growth. Bad weather early in the year and a still-weak labor market have also weighed on the economy.
"The forces holding back real GDP growth in the first quarter will prove temporary," said Dean Maki, chief U.S. economist at Barclays Capital in New York. "Other major indicators of activity have all been moving in a way consistent with strong, not weak, economic growth."
Businesses are starting to feel the pinch of high energy prices, a Federal Reserve report noted on Wednesday.
In its Beige Book summary of economic conditions, the U.S. central bank said the economy continued to improve over the past month, but higher commodity costs were reported to be putting upward pressure on prices.
EXPENSIVE GASOLINE BOOSTS SALES
Receipts at gasoline stations, which accounted for about 1/10th of overall retail sales last month, increased 2.6 percent after rising 2.4 percent in February.
Gasoline prices rose 35 cents to an average $3.62 a gallon last month, and the U.S. Energy Information Administration warned on Tuesday that prices could increase to about $4 a gallon nationwide this summer.
Upward revisions to January and February sales data took some of the sting out of the report, leaving consumer spending growth tracking at about a 2 percent rate in the first quarter, according to economists. - Reuters
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