Retail sales contracted in March for second time in three months

WASHINGTON -- Consumers cut back on their shopping in March, causing retail sales to contract for the second time in three months, the Commerce Department said Friday.

Retail sales fell 0.4% in March compared to the previous month, the biggest drop since June. Economists had expected sales to be flat.

The falloff was led by declines in spending at gas stations, department stores and at electronics and appliance retailers. Auto sales, which have been boosting retail figures, also declined in March.

An early Easter holiday and bad weather in much of the country might have contributed to the fall-off, analysts said.

But the figures also could reflect the impact of higher taxes, particularly the end of the payroll tax break that began on Jan. 1, and concerns about the automatic federal budget cuts known as sequestration.

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“The March spending data suggest consumers are more worried about the economy under the government’s spending sequester and are feeling the delayed financial impact of the increase in the payroll tax rate, which makes them return to de-leveraging and savings,” said Kathy Bostjancic, director of macroeconomic analysis for the Conference Board.

“We expect the fiscal headwinds from the sequester, the higher tax rates, and a still-sluggish labor market will keep consumer spending on a slow path for the next few months,” she said.

Retail sales were up 1% in February, but had been down 0.1% in January.

Still, retail sales were up 2.8% last month compared to a year earlier, the Commerce Department said.

Overall, retail sales for the first three months of the year were up 3.7% from the same period in 2012.

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