Decline in US retail sales cast shadow on Wall Street

US retail sales fell more than expected in April, dropping 0.4 per cent from the last month, the US Census Bureau reported Wednesday.

Analysts earlier predicted that sales would remain flat for the month as they see greenshoots in the economy with increasing footfalls in retail stores.

When compared with the previous year, April sales plunged 10.1 per cent. In addition, the Commerce Department revised its earlier estimate for March sales from a drop of 1.1 per cent to 1.3 per cent.

Reflecting the downtrend, investors spike shares of industrial producers and consumer-related businesses.

The Dow Jones industrial average dropped 184.22 points, or 2.18 per cent, to 8,284.89, while the Nasdaq was off 3 per cent, or 51.73 points, at 1,664.19.

Motor vehicle sales were down 20.7 per cent from a year ago, though it increase 0.2 per cent from March, indicating a slight revival in the automobile sector. Home improvement supplies, sporting goods and books also show a positive trend. Petrol sales fell 36.4 per cent lower than April 2008, due to falling petrol prices.

Furniture sales fell 14.2 per cent below April 2008. Electronics sales have fallen 12 per cent compared to a year ago. Food and grocery sales fell 1 per cent in the month and are down 1.3 per cent compared to a year ago.

Sales at retailers like clothing shops and to restaurants were down 10.1 per cent from a year ago, while electronics and appliance sales fell 2.8 per cent from March, and gas station sales fell 2.3 per cent.

Consumers are still cautious about spending money, and they are putting more away into savings accounts as the recession continues, say analysts.

However, some say the shoppers may not be returning to their old spendthrift ways, but they are returning to the malls, and are willing to buy when they see bargains.

With the unemployment rate at 8.9 per cent, the highest level since 1983, many consumers are likely to keep their heads down and save more to guard against losing their jobs, economists said. Joblessness is expected to average 9.6 per cent in 2010.

Fewer jobs, falling home values and the biggest loss of household wealth on record may limit consumers' ability to spend for years, they said.

Underscoring the shrewd spending tactics of the consumers , Department store operator Macy's Inc reported a loss of $88 million, or 21 cents a share, for the three months that ended May 2, compared with a loss of $59 million, or 14 cents a share for the year ago period.

To cut costs, the company trimmed its 2009 capital expenditure and reduced its quarterly dividend.

Apparel maker Liz Claiborne Inc also reported a first-quarter loss that was worse than analysts' expectations.

A separate report from the Commerce department showed inventories fell 1 per cent in March, as slumping sales forced companies to pull back.

The Federal Reserve and Treasury are trying to revive the markets for securities backed by car loans and other consumer credit, in an effort to revive economic growth. The joint programme, called the Term Asset-Backed Securities Loan Facility, is designed to grow as large as $1 trillion.