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Gov’t: Retail Sales Rise in March

Contradicting earlier reports of declines from stores, the Commerce Department Friday said retail sales rose slightly in March

WASHINGTON — Economists chalked up the slight gain in retail sales in March to seasonal anomalies, but noted a temporary bounce-back could occur with a successful end to the war in Iraq, combined with warmer spring weather.

Sales at clothing and accessories stores rose a seasonally adjusted 1.1 percent to $14.84 billion against February and gained 1.3 percent compared with March 2002, according to the Commerce Department’s retail sales report released Friday. Sales at department stores, excluding leased departments, fell slightly last month by 0.3 percent to $18.23 billion, while sales at general merchandise stores rose by 0.3 percent to $39.25 billion.

Continuing the pattern of year-over-year declines in March, sales at department stores plunged 4.7 percent, while sales at the broader general merchandise store sector, including department stores, discounters and warehouse stores, rose 4.1 percent.

Frank Badillo, senior economist at Retail Forward, said Commerce’s numbers, which show a monthly uptick in clothing and accessories stores, tell a much different story than comp-store sales figures reported individually by retailers and released Wednesday, which fell overall.

Badillo said his firm’s own weighted composite of same-store sales percentage changes for apparel and accessories stores were down 2.3 percent in March, due primarily to the shift in Easter from March to April and uncertainties over the war with Iraq.

“It was a much weaker picture and the government’s numbers might even be revised downward,” said Badillo. “The government could be having trouble sorting out the war, seasonal factors and cold weather, which lingered into March.”

Badillo claimed the general merchandise store increase was due primarily to sales strength at supercenters and warehouse clubs. He said conventional department stores, as well as discounters’ sales, were weak.

Overall, retail sales rose 2.2 percent in March, reversing a steep decline in February. Auto sales and building and home improvement sales drove the increases, according to economists.

The outlook, however, is uncertain and lackluster at best.

“Consumers were the engine behind the economy last year, but we don’t see as much strength for the next quarter,” said John Mothersole, senior economist at Global Insight. “Consumer confidence also tailed off due to the war with Iraq and that suggests a pause in some consumer spending.”

He said it is possible consumer confidence and spending could turn around as people see an end to the war on TV and warmer weather arrives.

Badillo said there may be a “bounce-back” in retail sales in the short run in line with the conclusion of the war with Iraq, but he warned it may not be sustainable in the long term.

“Consumers may get some confidence back and venture back into malls and stores,” said Badillo. “But that bounce-back may be fleeting because the economy is still dealing with difficult issues, such as consumer indebtedness.”