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Retail Sales Surprise - Down the Most in Nine Months

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Discretionary stocks kicked off 2013 with the same optimism as the rest of Wall Street, cheering strength in retail sales as consumers for a moment ignored the affect higher payroll taxes and forced unpaid furloughs might have on their wallets. But stocks took a turn for the worse Friday when data showed that consumers have taken a step back to reassess the need for tighter discretionary spending.

Consumer spending reports show a 0.4% decline in March retail sales, worse than expectations of a decline of 0.1%. March figures represent an even steeper loss compared to the 1.1% surge in February retail sales. Additionally, revised January retail data shows a 0.1% drop instead of a 0.2% increase, signaling that first-quarter performance was lower than initially forecast.

Gasoline sales received the biggest dent, down 2.2%. Sales fell the sharpest at gas stations though the average cost of regular gas fell from $3.72 a gallon to around $3.57 in March, according to government numbers.

Americans also spent less on books, music, personal-care goods and even groceries. Sales fell a seasonally adjusted 0.6% at auto dealers; 1.6% at electronic and appliance stores; 1.2% at general-merchandise outlets; and 1.1% at department stores.

Retail sales account for one-third of consumer spending, considered a measuring stick for U.S. growth rates. While economists had anticipated that sales might lose momentum in the spring in light of higher taxes, sequester, jobs data and other economic concern, March’s deceleration means sales have fallen in two of the first three months of 2013.

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