Originally created 03/14/03

Retail sales drop by 1.6 percent in February



WASHINGTON -- War worries and snow storms kept shoppers away from the stores, driving down sales at the nations' retailers by 1.6 percent in February. The worst showing in 15 months was another ominous sign for the sputtering economy.

The drop in sales reported by the Commerce Department Thursday marked a big pullback by consumers from January, when sales rose by a modest 0.3 percent. The weakness in February was widespread, with losses reported for automobile dealers, electronics and appliance stores, apparel shops and other merchants. Building and garden supply stores posted a record drop in sales.

February's retail sales were weaker than economists were expecting. They were forecasting sales to fall by 0.5 percent.

The disappointing retail sales report, along with a troubling employment report released by the government last week, may heighten concerns that the economy could again fall into recession.

In another report, the Labor Department said that new claims for unemployment benefits fell by a seasonally adjusted 15,000 last week to 420,000. Even with the decline, the level of claims is associated with a very weak job market.

The more stable, four-week moving average of claims, which smooths out weekly fluctuations, rose last week to a two-month high of 419,750.

The economy, which slid into a recession in 2001, has been struggling since then to get back to full health. The economic growth that the country has experienced since then has come from consumers.

But war worries, higher energy prices, a turbulent stock market and an ailing job market are making consumers more cautious. Snow storms that ravaged the East Coast also kept shoppers from hitting the malls.

Some economists believe the Federal Reserve might cut interest rates - which are already at 41-year lows - when it meets next on March 18. That view was spurred by last week's unsettling employment report which showed that the economy lost more than 300,000 jobs in February.

Other economists, however, believe Fed policy-makers will leave rates unchanged, saving some of their ammunition in case a war breaks out.

By holding interest rates at low levels or nudging them down, Fed policy-makers hope that will motivate consumers and businesses to spend and invest more, boosting economic growth.

President Bush, mindful of the political costs his father paid in 1992 for a weak economy, has offered a plan made up mostly of tax cuts to help energize the economy and get it back on a firmer footing.

Political analysts have long concurred that voter concern about the economy contributed in large part to the first President Bush's inability to win a second term in his race against Democrat Bill Clinton.

The 1.6 percent decline in retail sales in February marked the biggest drop since November 2001, when the economy was still feeling the terrible jolt of the Sept. 11 terror attacks in New York and Washington.

In February, sales at automobile dealers dropped by 3.4 percent, the biggest decline in five months, following a 2.6 percent decline in January. Top automobile makers recently said they would pare production as a result of concerns that favorable financing deals and other generous incentives wouldn't sufficiently motivate buyers.

Excluding sales of automobiles, which can swing widely from month to month, overall retail sales fell by 1 percent in February, a weaker showing than economists were forecasting.

At furniture stores, sales fell by 1.6 percent in February, after a 0.2 percent decline.

Building and garden supply stores saw sales plunge by a record 7.5 percent in February, a reversal from a 2.5 percent increase posted in January.

Sales of electronics and home appliances went down by 0.5 percent last month, following a 1.1 percent drop.

At clothing stores, sales declined by 3.6 percent, down from a 0.3 percent rise. At sporting goods, music, book and hobby stores, sales went down by 1.6 percent, compared with a 0.8 percent rise in January.

Consumers ate out less. Sales at bars and restaurants fell by 0.5 percent in February, on top of a 0.4 percent decline.