U.S. March retail sales up 0.2% as consumers step up spending

Some economists said the gain was partly explained by accelerating food prices, however, which have been stoked higher by rocketing global commodity costs.

“Consumer spending was not as weak as feared, but that is because people are paying a lot more for food and energy. There were strong increases in food and gasoline demand, which is likely just the result of the price spikes in these goods,” said Joel Naroff, the president of Naroff Economic Advisors.

Core retail sales, which exclude auto sales, rebounded by 0.1 percent, the Commerce Department said in a monthly snapshot.

The headline increase was a notch better than forecasts as most analysts had expected retail sales to rebound 0.1 percent.

The latest retail sales survey revealed an improved picture compared with February, but analysts say American consumers are still being pinched by the housing slump, a related credit squeeze and surging gasoline prices.

“Today’s retail sales report for March continues to highlight the precarious state of the U.S. consumer, with sales only seeing a modest pop that doesn’t come close to making up for the decline posted last month,” Merrill Lynch economist David Rosenberg said in a briefing note.

The government revised its February retail sales readings to show a decline of 0.4 percent for the overall index and a fall of 0.1 percent for core sales, compared with initial estimates showing a decline of 0.6 percent and 0.2 percent respectively.

Economists track retail sales closely because consumer spending accounts for around two-thirds of all U.S. economic growth.

The overall rise in sales last month was supported by gasoline station sales, which rose 1.1 percent, and Internet retailing, as online retail turnover increased 2.1 percent.

Americans meanwhile appeared to regain some of their appetite for eating out as restaurant and cafe sales rebounded to show a gain of 0.3 percent compared with a sales decline of 0.2 percent in February.

But the lingering housing market downturn continued to weigh on consumers as home furniture store sales declined 0.3 percent while gardening store sales dropped 0.1 percent.

U.S. economic growth has slowed dramatically in recent months and a growing number of economists believe the world’s largest economy will experience a recession during the first half of 2008.

The Federal Reserve has cut interest rates aggressively in a bid to shore up growth and avert a worsening of the credit crisis ravaging the banking and financial sector.

“The next FOMC (Federal Open Market Committee) meeting is scheduled for April 30th. We look for a 50 basis point cut to 1.75 percent” in the federal funds interest rate, said Stephen Gallagher, an economist at Societe Generale.

The central bank has slashed the fed funds short-term rate by three percentage points to 2.25 percent since September and many economists believe the Fed will cut rates again later this month.

Analysts believe housing woes, the credit crunch and rising job losses will pressure the Fed to make fresh rate cuts.

Motor vehicle and parts sales rose 0.2 percent in March, vexing some economists who pointed out that big auto makers reported hefty sales declines last month.

General Motors, Ford and Chrysler all reported a double-digit plunge in sales in March compared to the same month a year earlier.

In the year to March, overall retail sales were up two percent while sales excluding autos had gained 3.3 percent.

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