Tags: U.S. | Retail | Sales | Dismal | March

U.S. Retail Sales Dismal in March

Thursday, 06 April 2006 12:00 AM

"As the nation's merchants reported their monthly results Thursday, Wal-Mart Stores Inc., J.C. Penney Co., Gap Inc., Abercrombie & Fitch Co. and Sharper Image Corp. were among the disappointments," the AP reported. Only a few companies - like wholesaler Costco and department store Nordstrom - beat expectations.

The weak gains were blamed on unseasonably cold weather that lasted longer than expected, elevated gas prices, higher interest rates and an unusually late Easter that is thought to have limited spending.

"With this year's Easter holiday occurring in April versus in March last year, retail analysts had warned that shoppers would likely shift their holiday shopping into this month, adversely impacting sales last month," according to CNNMoney.

Many retailers allowed for the late arrival of Easter by slashing two percentage points from March sales right off the bat, according to a report from Piper Jaffray. Meanwhile, other factors also took their toll.

"With cool spring weather, retailers were unable to sell much seasonable merchandise in March," Dan Popowics - an analyst with Fifth Third Asset Management in Cincinnati, which manages $22 billion in assets, including Wal-Mart shares - told Bloomberg.

"Easter is coming at the tail end this year. That means April will make or break their fiscal first quarter."

While Easter accounted for some $9.6 billion in sales last year, the holiday's late 2006 arrival stymied retailers' attempts to promote spring merchandise early - a development that affected the entire retail industry. Higher gas prices kept many consumers at home, while elevated interest rates made it much more expensive for them to finance debt.

March was tough, but analyst Popowics anticipates a "pretty healthy rebound" in sales for April.

Wall Street Journal Radio reports that tomorrow's jobs number should clock in somewhere around 180,000.

"It won't be as high as the 260,000 jobs created we saw in February," said The Journal. "But it won't be bad, either."

As the 2006 election season approaches, political analysts say good job numbers may be the key for the GOP to keep its majority in the House and Senate. But any sizeable decrease may open the door for Democrats.

Today, jobless claims fell 5,000 to a lower-than-expected 299,000 for the week ending April 1. It was the third consecutive week that jobless claims were down. That could be a signal that the jobs number may be better than expected.

Stay tuned for tomorrow's big report.

Chicago Federal Reserve President Michael Moskow devoted most of a speech on Thursday to the United States.' huge current - account deficit, according to Reuters.

Moskow also commented on housing as it relates to Fed policy, reports Reuters. Among housing's "upside risks" is the possibility that a slowdown would bring "growth back to potential," meaning that inflation would largely be contained. 

A strong housing market would be a "downside risk," according to Moskow. The Fed president explains that "this would then heighten the risk of an above-trend GDP growth and the further development of pressures on resources." This means that inflation would likely build, and the Fed would need to hike rates.  

The 10-year Treasury note topped 4.90% this week, and analysts says that the benchmark yield could rise above 5% soon, according to CNN. 

The 10-year note yield is now at it's highest level in four years.

The Fed hiked short-term rates to 4.75% last week and is expected to hike another quarter-point in May. Long-term rates which hadn't been very responsive to Fed hikes in the past, causing an inverted yield curve are now moving higher. The yield curve is now flat and could be moving back to a traditional curve soon.

That's a sign that bond traders agree with the Fed's rate hikes and see a possibility of higher inflation in the future.

Analysts also say that as Japan and Europe begin to raise rates, U.S. bonds could become less attractive. That would force bond yields higher, in an effort to attract more investors.

Higher long-term interest rates have huge ramifications on the U.S. economy. They mean higher mortgages rates for homebuyers, and higher lending costs for U.S. businesses.

We've already seen a slowdown in housing as prices for houses climbed and rates rose in tandem. U.S. consumers, who have been using their homes as cash machines for the past few years, may have to cut back on spending as housing slows. Consumers make up more than two-thirds of the economy. If they stop spending, the health of the economy could tank.

U.S. businesses enjoyed record profits last year which translated to more cash in their coffers, but a slowdown in consumer spending could mean a dearth of profits in a year or so. At that point, higher lending rates would seriously cut into business health.


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"As the nation's merchants reported their monthly results Thursday, Wal-Mart Stores Inc., J.C. Penney Co., Gap Inc., Abercrombie & Fitch Co. and Sharper Image Corp. were among the disappointments," the AP reported. Only a few companies - like wholesaler Costco and...
Thursday, 06 April 2006 12:00 AM
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