US Economy: Retail Sales Unexpectedly Fell in April

May.15.2009 Business news

May 13 (Bloomberg) — Retail sales in the U.S. unexpectedly dropped in April for a second month, indicating that rising unemployment is prompting consumers to conserve cash.

The 0.4 percent decrease followed a revised 1.3 percent drop in March that was larger than previously estimated, the Commerce Department said today in Washington. Other reports showed companies continued to cut stockpiles as demand slowed, and climbing oil costs pushed up prices for imported goods.

Fewer jobs, falling home values and the biggest loss of household wealth on record may limit consumers’ ability to spend for years, analysts said. Stocks dropped for a third day as the reports indicated any recovery from the worst recession in at least half a century is likely to be subdued.

“It looks like consumers are losing momentum heading into the second quarter and that is a very worrisome development,” said Carl Riccadonna, an economist at Deutsche Bank Securities Inc. in New York. “They have very significant headwinds and number one among them is that the labor market is far from turning the corner.”

The Standard & Poor’s 500 Stock Index fell 2.7 percent to close at 883.92. Benchmark 10-year note yields fell to 3.11 percent at 4:16 p.m. in New York from 3.18 percent late yesterday.

A separate report from Commerce showed inventories at U.S. businesses fell 1 percent in March, a seventh consecutive drop as slumping sales forced companies to pull back. The streak of decreases is the longest since 2001-2002.