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April 15, 2010

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Confident shoppers boost sales in March

RETAIL sales in the United States rose for the third straight month in March as better weather and auto incentives brought shoppers out in force.

The rise was more than economists had expected. It's the latest sign that consumer spending is rising fast enough to support a modest economic recovery.

Sales rose 1.6 percent last month, the US Commerce Department said yesterday, up from February's revised 0.5 percent gain.

The increases were widespread. Car dealers, home furnishing stores, building suppliers, sporting goods stores, clothing retailers and general merchandise stores all reported gains. Auto sales rose 6.7 percent, the department said, the most since last October.

In a separate report, the US Labor Department said consumer prices edged up just 0.1 percent in March. And excluding food and energy, prices were unchanged in March. Over the past 12 months, those prices have risen at their slowest pace in six years.

Still, household budgets remained under pressure as hourly earnings fell again.

In the retail sales report, the Commerce Department said that, excluding autos, sales rose 0.6 percent.

Consumers cut back sharply and boosted their savings during the Great Recession. But some appear to be spending more freely.

"Consumers are coming out of their shells despite a very weak labor market," said Zach Pandl, an economist at Nomura Securities. They have "emerged from the financial crisis with fewer scars than we had feared."

Pandl estimates consumer spending may have risen by as much as 4 percent in the January-to-March quarter - more than double the 1.6 percent rise in last year's fourth quarter. That would be the biggest quarterly gain in three years.

The gain is largely a result of reduced saving. Disposable income actually dipped in the first quarter, according to Nigel Gault, chief US economist at IHS Global Insight. The unemployment rate was 9.7 percent in March.

Consumers' willingness to spend more means they are likely "looking ahead to better times," Gault said.

Companies added the highest number of workers to their payrolls in three years in March, the government said earlier this month.




 

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