U.S. retail sales unexpectedly fell in March as households cut back on purchases of automobiles and other items, further evidence that economic growth stumbled in the first quarter.
Other data on Wednesday showed a surprise drop in producer prices last month as rising energy prices were offset by a decline in the cost of services. The two reports suggested the Federal Reserve will probably not raise interest rates until later this year.
“The data solidifies the well-entrenched narrative of a very weak first quarter for the U.S. economy. For the Federal Reserve … it argues for continued caution,” said Millan Mulraine, deputy chief economist at TD Securities in New York.
The Commerce Department said retail sales declined 0.3 percent last month, confounding economists’ expectations for a 0.1 percent gain. They were unchanged in February.
Retail sales excluding automobiles, gasoline, building materials and food services ticked up 0.1 percent last month after edging up 0.1 percent in February. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
March’s weak numbers implied that consumer spending lost steam after robust gains in 2015, and put consumption on a slow path heading into the second quarter. Consumer spending accounts for more than two-thirds of U.S. economic activity.
“Consumer activity, which has been the primary driver of economic activity, in the wake of the sluggishness in the industrial sector, has lost momentum,” said Lewis Alexander, chief economist at Nomura Securities in New York. “The weak numbers for March will probably set a lower jumping-off point for personal spending in the second quarter.”
U.S. financial markets were little moved by the data as investors focused on strong trade data from China. The dollar rose against a basket of currencies and U.S. stocks were trading higher. Prices for shorter-dated U.S. Treasuries fell slightly.
The retail sales report added to recent data on trade and business spending in suggesting the economy hit a soft patch in the first three months of the year. That was reinforced by a second report from the Commerce Department showing a dip in business inventories in February.