The US consumer, whose wielding of their credit cards has so often driven the world economy, was more subdued than hoped last month, dampening hopes for a quick and strong recovery from recession.
Retail sales fell for the second month in a row in April, when economists had expected them to be flat, and the Commerce Department also revised down its retail sales figure for March. In January and February, retail sales had actually turned positive as the shock of last summer's financial panic and the surge in unemployment appeared to fade.
The renewed downturn was reflected in downbeat comments yesterday from the famous US department store chain, Macy's, and by other retailers.
April retail sales fell at an annualised rate of 0.4 per cent, the Commerce Department said, after a 1.3 per cent decline in March. A month ago, the March figure had been put at -1.2 per cent. Consumer spending accounts for more than two-thirds of all economic activity in the US, and the demand for goods has spurred manufacturing industry in emerging markets. That trend slammed into reverse as the credit crisis worsened.
"The US retail sales data is another illustration that, although the worst is over, there is still no evidence of an actual recovery," said Paul Dales, US economist with Capital Economics.
Macy's posted a smaller-than-expected quarterly loss, as cost cuts eased the pain of weak sales, but it stuck to its forecast for a sales decline of 6-8 per cent overall this year. Its sales fell 9.5 per cent to $5.2bn (£3.4bn) in the first quarter and Macy's said its net loss widened to $88m from $59m a year ago.
Also yesterday, shares in the apparel maker Liz Claiborne – whose brands include Juicy Couture – plunged more than 20 per cent after it said its quarterly loss had almost trebled and that shoppers were only parting with their money when they saw steep discounts.
Businesses are still struggling to adjust to the sluggish demand from consumers. Retailers are buying in less stock, meaning fewer orders for manufacturers, who in turn are cutting production and laying off staff.
Inventories – that is, the backlog of unsold stock – held by US businesses fell for a seventh straight month in March, but there were still enough goods on hand to last 1.44 months at the current order rate, the same as in February. The 1 per cent drop in the value of inventories at factories, wholesalers and retailers failed to keep pace with a 1.6 per cent drop in demand, according to the government's survey, suggesting more production cuts and lay-offs to come.
Tim Geithner, the Treasury Secretary, was nonetheless upbeat about the prospects for a recovery now that the financial system is, in his words, "starting to heal". Speaking to community bankers, Mr Geithner said: "The more vulnerable parts of the non-bank financial system no longer exist... A substantial part of the adjustment process is now behind us."