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Sales, prices edge lower
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April 12, 2001: 11:05 a.m. ET
Retail sales in March off 0.2%; consumer confidence down in early April reading
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NEW YORK (CNNfn) - Retail sales fell in March and the latest reading of consumer confidence is weaker than expected, raising new concerns about the slowdown in the U.S. economy and sparking calls for immediate interest rate cuts by the Federal Reserve.
Retail sales fell 0.2 percent in March to $274.1 billion, the Commerce Department said. Wall Street economists had forecast sales would be flat. A Department of Labor report also showed wholesale prices edging lower, again falling below estimates.
The Commerce Department report on retail sales comes as major retailers reported generally soft sales in March and as new claims for unemployment benefits filed last week rose to their highest level in more than five years, topping forecasts. A key measure of consumer confidence also came in weaker than expected.
The University of Michigan's preliminary consumer sentiment index, which measures consumers' attitudes about the economy and their current financial picture, fell to 87.8 in April from 91.5 in March, according to subscribers to the index, which is not released to the public until next week. Analysts had expected the index to fall to 90.4.
The government's retail spending report showed several key measures of consumer spending came in weaker than forecast.
Sales excluding autos fell 0.1 percent from February and 0.2 percent from a year ago, when auto sales still were at red-hot levels. Purchases of durable goods, which include most big-ticket items meant to last at least three years, slipped 0.7 percent from February's levels, and building materials sales were down 3.7 percent from a year ago.
Calls for more rate cuts by Fed
Together these reports suggested that consumers, who are responsible for about two-thirds of the nation's economy, are pulling back their dollars, raising the risk of a longer-than-hoped downturn in the U.S. economy.
After three days of strong gains in the U.S. stock markets, the recession concerns raised by the numbers sent equities lower Thursday morning, although stocks rebounded by midday.
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Several economist said Thursday's economic news could push the Federal Reserve to cut interest rates again before its next meeting.
"This does open the door perhaps for an intra-meeting interest rate cut," said Peter Cardillo, director of research for Westfalia Investments. Before the release of the consumer confidence data, he said that if it were weak, "We could see a cut over the weekend."
The Fed already has cut interest rates three times this year, including once in advance of its January meeting, in a bid to stop the economy from falling into recession.
Robert Brusca, chief economist of Ecobest Consulting, told CNNfn's Before Hours program that the weakness in the latest economic numbers definitely justifies a rate cut.
"This not really a great picture," he said. "It's not a disaster. But we don't have any momentum building. I still think the consumer looks like he's touch and go and I'd like to see the Fed do more. It's a long time between meetings and there's very little risk in the Fed being too aggressive in here. The economy clearly is weak." (330KB WAV) (330KB AIFF)
But Bryan Piskorowski, market analyst at Prudential Securities, said he's not convinced the Fed will act before its May 15 meeting. The reports mean "that the Fed will have to continue cutting interest rates, though it probably won't act before its next meeting," he said.
Westfalia's Cardillo said the lack of inflationary pressures in the producer price index report released Thursday is good news for those looking for another rate cut.
The index, which measures prices at the wholesale level, fell 0.1 percent last month due to a drop in energy prices, after February's 0.1 percent increase, the Labor Department said. The March reading was lower than Wall Street forecasts for a slight gain.
The so-called core PPI, excluding often volatile food and energy prices, rose 0.1 percent versus forecasts for a 0.2 percent rise.
Separately, new claims for jobless benefits jumped to 392,000 last week, the highest in five years, from a revised 383,000 the prior week.
-- Reuters contributed to this report 
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