Retail sales down more sharply than expected

WASHINGTON (AP) — Retail sales fell unexpectedly in March, delivering a setback to hopes that the economy's steep slide could be bottoming out.

The Commerce Department said Tuesday that retail sales dipped 1.1 percent in March. It was the biggest decline in three months and a much weaker showing than the 0.3 percent increase that analysts expected.

A big drop in auto sales led the overall slump in demand. Sales also plunged at clothing stores, appliance outlets and furniture stores.

Meanwhile, the Labor Department reported that wholesale prices plunged 1.2 percent in March as the cost of gasoline, other energy products and food fell sharply.

Gas prices fell 13.1 percent, the steepest drop since December, while food costs dipped 0.7 percent. Excluding volatile food and energy prices, the Producer Price Index was unchanged, below analysts' forecasts of a 0.1 percent rise.

Seasonal adjustments could partly explain the unexpectedly weak showing for retail sales. The March 2008 performance had been boosted by an early Easter, while the holiday did not occur this year until April, delaying some shopping.

The overall economy, as measured by the gross domestic product, fell at an annual rate of 6.3 percent in the final quarter of last year, the biggest slide in a quarter-century led by the largest drop in consumer spending in 28 years. Consumer spending is closely watched because it accounts for about 70 percent of total economic activity.