Stores suffer big drop in March sales

Unexpected 1.1% decline in overall sales follows two months of gains.

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By Parija B. Kavilanz, CNNMoney.com senior writer

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NEW YORK (CNNMoney.com) -- Retail sales suffered an unexpected big decline in March which broke two straight months of improving sales, the government reported Tuesday.

The Commerce Department said total retail sales fell 1.1% last month, compared with February's revised gain of 0.3%. Sales in February were originally reported to have dipped 0.1%.

Economists surveyed by Briefing.com had been expecting an increase of 0.3% in March.

Sales excluding autos and auto parts fell a surprising 0.9% compared to a revised 1% increase in the measure for February. February ex-auto sales were originally reported to have increased 0.7%.

Economists had forecast March sales, excluding auto purchases, to be unchanged from the previous month.

"We're struggling a bit to interpret these numbers," said Scott Hoyt, senior director of consumer economics for Moody's Economy.com.

For one thing, Hoyt said improving sales both in January and February "gave us reason to believe that retail sales were starting to head in a positive direction."

Also, Hoyt and others said the yearly shift in the Easter holiday means that March and April sales really should be looked at together.

To his point, Wal-Mart (WMT, Fortune 500) and other big chain stores last week reported slower-than-expected March same-store sales, blaming a late Easter for pushing holiday-related purchases into April.

Same-store sales, another important gauge of a merchant's performance, measure sales at stores open at least a year.

"As always in March-April we have to be suspicious of the seasonal [factors], which struggle to cope with Easter," Ian Shepherson, chief U.S. economist with High Frequency Economics, wrote in a report Tuesday.

"Still, for now this looks like something of a reality check after a run of upside data surprises," he said.

At the same time, the latest government numbers are likely to re-ignite concerns that consumer spending, which fuels two-thirds of economic activity, has not yet rebounded in light of accelerating job losses.

"We're not sure yet how much of the [sales] weakness is real and how much is based on the Easter shift," Hoyt said. "There are still lots of weights on consumer spending. The housing market is still weak and we're losing 600,000 or more jobs every month."

Last month's sales erosion was broad-based. Autos led the decline, registering a 2.3% drop in sales last month.

Sales at electronics stores tumbled 5.9%, furniture sellers logged a 1.7% drop in their sales while clothing purchases declined 1.8%, the report showed.

Elsewhere, department store sales slipped 0.3%, building material sales dropped 0.6% in the month and gasoline station sales declined 1.6%. To top of page

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