Retail sales drop 0.3% in March

U.S. retail sales fell last month as Americans cut back on their car purchases, the latest sign that consumers are reluctant to spend freely.

A 2.1% plunge in auto sales — the steepest such fall in more than a year — accounted for most of the drop. But sales were weak in some other sectors, including clothing and restaurants and at online and catalog stores.

Overall retail sales fell by a seasonally adjusted 0.3% in March, the Commerce Department said Wednesday, following a flat reading in February and a drop in January.

Americans have been more cautious about spending this year than most economists expected, despite steady job gains and lower gas prices. That’s a key reason analysts now think the economy barely expanded in the first quarter.

Still, there were some faint signs of consumer health in the report. Excluding autos and gasoline, sales trends look healthier, rising 0.1% last month and 0.6% in February.

Sales in March jumped 1.4% at home supply stores. They also rose at furniture, electronics and health retailers. General merchandise stores, which include chains such as Wal-Mart and Target, posted higher sales as well.

The retail report provides the first indication each month of Americans’ spending, which drives 70% of the economy. Retail sales account for only about one-third of all spending, with services such as haircuts and Internet access making up the other two-thirds.

Steve Murphy, an economist at forecasting firm Capital Economics, said spending on services has growth at a 3% clip this year, offsetting some of the weakness in retail.

“With employment gains still healthy and real incomes growing at a solid pace, we expect consumption growth to rebound further over the first half of the year,” he said.