WASHINGTON — A fundamental weakness in the economy coupled with steep job losses led to a decline in retail apparel sales across the board in April, according to economists.
Sales at clothing and accessories stores in April dropped sharply on a seasonally adjusted basis by 3.2 percent to $14.3 billion against March, and also fell 0.9 percent against April 2002, according to the Commerce Department’s retail sales report released Wednesday.
Sales at department stores, excluding leased departments, fell a seasonally adjusted 1.4 percent in April to $17.8 billion, while sales at general merchandise stores, which include department stores, discounters and warehouse stores, declined 0.6 percent to $38.7 billion.
Continuing the year-over-year declines in April, sales at department stores fell dramatically by 8.3 percent, while sales at the broader general merchandise sector gained 1.2 percent.
“We are seeing some fundamental weakness that reflects the fact that the economy lost 525,000 jobs from January though April,” said Sara Johnson, managing director of the global macroeconomics group at Global Insight in Lexington, Mass. “Income growth has stalled and consumers are nervous about economic outlooks, so they cut spending and save more of their income.”
She noted month-to-month sales have been volatile this year and attributed March’s uptick in retail sales to “catch-up for a weather-related drop in February.” She added that April’s drop was partly affected by cooler-than-normal weather in the Northeast. Johnson said there are some bright spots that could help create a recovery, such as a rebound in the stock market and low interest rates.
Frank Badillo, senior economist at Retail Forward, said the volatility in the monthly sales numbers is hard to decipher, but noted that the underlying cause is weakness in the consumer environment.
“Fundamentally, the job market affects confidence,” he said. “But we’ve seen, even though consumers have a flagging confidence pattern, they are also opportunists.”
That pattern also holds true for apparel purchases, he said.
“Where there is a strong reason to buy, people will buy,” Badillo noted. “We see some strength among certain retailers who have struck a chord with certain segments, such as teens or boomers, or they have stronger fashion than they did in the past and they are able to generate strong gains.”In the coming months, retail apparel sales could be affected by inventory levels, which started to decline after the holiday and into spring, he said.
“With demand falling off, while inventories decline, there is more downward pressure on prices, which makes it tough to grow sales in the coming months,” Badillo said. “Consumers will respond and take advantage of price cuts, but all those price cuts will be a drag on sales and ultimately profits.”
Overall, retail sales fell 0.1 percent from the previous month, but were up 4.1 percent against April 2002. Excluding autos and gas, retail sales were down 0.4 percent, according to Badillo.
“At some point, it will bottom out but remain weak for awhile,” said Badillo. “As we get further away from the winter effects and war effects, we will start to see a true trend emerge, but it will not be a pretty one. I expect to see weakness persist through the summer months.”
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