WASHINGTON – Retail sales contracted in March for the second time in three months, a sign the American economy may have stumbled at the end of the first quarter.
Retail sales fell 0.4 percent during the month, the Commerce Department said on Friday. That was below analysts' expectations that sales would be flat.
Readings for retail sales have been volatile so far this year, making it difficult to know whether the weakness in March was due to a tax hike that went into effect at the start of the year or to temporary factors related to the weather.
Retail sales advanced 1 percent in February, according to revised readings from the government.
Stripping out cars, gasoline and building materials, sales fell 0.2 percent in March. This core measure corresponds closely with the consumer spending component of gross domestic product. The government revised lower past core retail sales figures to show a 0.3 percent gain in February and flat sales in January.
Prior reports on retail sales had made consumers look surprisingly resilient despite tax increases that kicked in on January 1. A tax on payrolls climbed for all workers, while income tax rates rose for the nation's most wealthy.
Fiscal policy tightened further in March when the federal government began across-the-board spending cuts, part of Washington's efforts to shrink the budget deficit.
Non-partisan researchers in the U.S. Congress estimate Washington's austerity drive will subtract about 1.5 percentage points from economic growth this year.
Many economists have also noted the loss of economic momentum in many economic indicators for March could have been due to a warm winter which may have led companies and consumers to pull forward spending.
Indicators from retail sales and hiring to factory manager confidence were much stronger in February, and a chilly March may have dulled activity.
It is also plausible that economic reports have not accurately adjusted for the shift in timing for the Easter holiday, which fell in March of this year after falling in April of 2012.
The weakness in March retail sales was broad based, with car sales down 0.6 percent and receipts from electronics and appliance stores down 1.6 percent. Sales at clothing stores rose just 0.1 percent.
(Reporting by Jason Lange; Editing by Neil Stempleman)