US sees retail sales climb 0.2%

There are concerns that the US is already in a recession

US retail sales edged upwards in March, beating analysts' expectations, according to the Commerce Department.

Retail sales climbed 0.2% in the month, after a 0.4% fall in February, which was revised upwards from a 0.6% fall.

Consumer spending is closely watched in the US because it accounts for about two-thirds of total economic activity.

However, analysts remained cautious after a consumer survey late last week showed shopper sentiment had fallen to its lowest level in 26 years.

Slowdown

The main driver of sales was stronger demand at petrol service stations, where sales climbed by 1.1% in March.

Consumer spending was not as weak as feared, but that is because people are paying a lot more for food and energy Jole Naroff, president of Naroff Economic Advisors

However, analysts warned that the retail sales figures were weak when petrol sales were not taken into account.

"If we go back to Friday's weak consumer numbers, it bodes ill for retail sales going forward," said Matthew Strauss of RBC Capital Markets.

Rising energy and food prices are taking their toll on consumer spending, while access to credit is becoming harder.

Christopher Low of FTN Financial pointed out that there was still "weakness in furniture, electronics, building materials and clothing".

Core retail sales, excluding vehicle sales, rose by 0.1%.

Demand at department stores and general goods stores were hit by the fact Easter fell unusually early, when weather was bad, making consumers less keen to go shopping.

The International Monetary Fund (IMF) recently lowered its world growth forecast for 2008 and said it expected the US to enter a "mild recession" this year.

US stocks were little changed by the economic data. The Dow Jones industrial average slipped 0.01% at 12,323.71 while the Standard & Poor's 500 Index slipped 0.06% at 1,332.00 in early trade.

"Consumer spending was not as weak as feared, but that is because people are paying a lot more for food and energy," said Jole Naroff, president of Naroff Economic Advisors.

"There were strong increases in food and gasoline demand, which is likely just the result of the price spikes in these goods."